10-K 1 v335778-10k.htm FORM 10-K

  

  

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K

 
x   Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934.
     For the year ended December 31, 2012
o   Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934.
     For the transition period from         to        

Commission File number 000-50210

ATEL Capital Equipment Fund IX, LLC

(Exact name of registrant as specified in its charter)

 
California   94-3375584
(State or other jurisdiction of
incorporation or organization)
  (I. R. S. Employer
Identification No.)

The Transamerica Pyramid, 600 Montgomery Street, 9th Floor, San Francisco, California 94111

(Address of principal executive offices)

Registrant’s telephone number, including area code: (415) 989-8800

Securities registered pursuant to section 12(b) of the Act: None

Securities registered pursuant to section 12(g) of the Act: Limited Liability Company Units

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Act of 1934. Yes o No x

Indicate by a check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

     
Large accelerated filer o   Accelerated filer o   Non-accelerated filer o
(Do not check if a smaller reporting company)
  Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

State the aggregate market value of voting stock held by non-affiliates of the registrant: Not applicable

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as of a specified date within the past 60 days. (See definition of affiliate in Rule 12b-2 of the Exchange Act.) Not applicable

The number of Limited Liability Company Units outstanding as of February 28, 2013 was 12,055,016.

DOCUMENTS INCORPORATED BY REFERENCE

Prospectus dated January 16, 2001, filed pursuant to Rule 424(b) (Commission File No. 333-47196) is hereby incorporated by reference into Part IV hereof.

 


 
 

TABLE OF CONTENTS

PART I

Item 1. BUSINESS

General Development of Business

ATEL Capital Equipment Fund IX, LLC (the “Company” or the “Fund”) was formed under the laws of the State of California on September 27, 2000 for the purpose of engaging in the sale of limited liability company investment units and acquiring equipment to engage in equipment leasing, lending and sales activities, primarily in the United States. The Managing Member of the Company is ATEL Financial Services, LLC (“AFS”), a California limited liability company. The Company may continue until December 31, 2020. Contributions in the amount of $600 were received as of December 31, 2000, $100 of which represented AFS’s continuing interest, and $500 of which represented the initial Member’s capital investment.

The Company conducted a public offering of 15,000,000 Limited Liability Company Units (“Units”), at a price of $10 per Unit. On February 21, 2001, subscriptions for the minimum number of Units (120,000, representing $1.2 million) had been received (excluding subscriptions from Pennsylvania investors) and AFS requested that the subscriptions be released to the Company. On that date, the Company commenced operations in its primary business (acquiring equipment to engage in equipment leasing, lending and sales activities). As of April 3, 2001, the Company had received subscriptions for 753,050 Units ($7.5 million), thus exceeding the $7.5 million minimum requirement for Pennsylvania, and AFS requested that the remaining funds in escrow (from Pennsylvania investors) be released to the Company.

As of January 15, 2003, the offering was terminated. As of that date, the Company had received subscriptions for 12,065,266 Units ($120.7 million). Subsequent to January 15, 2003, Units totaling 10,250 were rescinded or repurchased and funds returned to investors (net of distributions paid and allocated syndication costs, as applicable). As of December 31, 2012, 12,055,016 Units remain issued and outstanding.

The Company’s principal objectives have been to invest in a diversified portfolio of equipment that (i) preserves, protects and returns the Company’s invested capital; (ii) generates regular distributions to the members of cash from operations and cash from sales or refinancing, with any balance remaining after certain minimum distributions to be used to purchase additional equipment during the reinvestment period (“Reinvestment Period”) (defined as six full years following the year the offering was terminated), which ended on December 31, 2009 and (iii) provides additional distributions following the Reinvestment Period and until all equipment has been sold. The Company is governed by the Limited Liability Company Operating Agreement (“Operating Agreement”), as amended. On January 1, 2010, the Company commenced liquidation phase activities pursuant to the guidelines of the Operating Agreement.

The Company has incurred debt to finance the purchase of a portion of its equipment portfolio. The amount of borrowings in connection with any equipment acquisition transaction was determined by, among other things, the credit of the lease, the terms of the lease, the nature of the equipment and the condition of the money market. There was no limit on the amount of debt that may be incurred in connection with any single acquisition of equipment. However, the Company may not incur aggregate outstanding indebtedness in excess of 50% of the total cost of all equipment as of the date of the final commitment of the offering proceeds and, thereafter, as of the date of any subsequent indebtedness is incurred. The Company has borrowed amounts within such maximum debt level in order to fund a portion of its equipment acquisitions. There can be no assurance that such financing will continue to be available to the Company in the future.

The Company also incurred long-term recourse debt in the form of asset securitization transactions in order to obtain lower interest rates or other more desirable terms than may be available for individual non-recourse debt transactions. In an “asset securitization,” the lender would receive a security interest in a specified pool of “securitized” Company assets or a general lien against all of the otherwise unencumbered assets of the Company. It had been the intention of AFS to use asset securitization primarily to finance assets leased to those credits which, in the opinion of AFS, had a relatively lower potential risk of lease default than those lessees with equipment financed with non-recourse debt. AFS expected that an asset securitization financing would involve borrowing at a variable interest rate based on an established reference rate, and sought to limit the Company’s exposure to increases in the interest rate by engaging in hedging transactions that would effectively fix the interest rate obligation. As of August 22, 2011, all advances under such securitized borrowings were repaid in full and the program was terminated.

1


 
 

TABLE OF CONTENTS

Pursuant to the terms of the Operating Agreement, AFS receives compensation and reimbursements for services rendered on behalf of the Company (See Note 7 to the financial statements included in Item 8 of this report). The Company is required to maintain reasonable cash reserves for working capital, the repurchase of Units and contingencies. The repurchase of Units is solely at the discretion of AFS.

Narrative Description of Business

The Company has acquired various types of equipment to lease pursuant to “Operating” leases and “High Payout” leases, whereby “Operating” leases are defined as being leases in which the minimum lease payments during the initial lease term do not recover the full cost of the equipment and “High Payout” leases recover at least 90% of such cost. It was the intention of AFS that a majority of the aggregate purchase price of equipment will represent equipment leased under operating leases upon final investment of the net proceeds of the offering and that no more than 20% of the aggregate purchase price of equipment would be invested in equipment acquired from a single manufacturer.

The Company has only purchased equipment under pre-existing leases or for which a lease will be entered into concurrently at the time of the purchase. Through December 31, 2012, the Company had purchased equipment with a total acquisition price of $177.8 million. The Company also had investments in notes receivable of which $965 thousand remained outstanding at December 31, 2012.

The Company’s objective has been to lease a minimum of 75% of the equipment acquired with the net proceeds of the offering to lessees that (i) have an aggregate credit rating by Moody’s Investors Service of Baa or better, or the credit equivalent as determined by AFS, with the aggregate rating weighted to account for the original equipment cost for each item leased or (ii) are established hospitals with histories of profitability or municipalities. The balance of the original equipment portfolio may include equipment leased to lessees which, although deemed creditworthy by AFS, would not satisfy the general credit rating criteria for the portfolio. In excess of 75% of the equipment acquired with the net proceeds of the offering (based on original purchase cost) was originally leased to lessees with an aggregate credit rating of Baa or better or to such hospitals or municipalities, as described in (ii) above.

During 2012 and 2011, one lessee generated a significant portion of the Company’s total leasing and lending revenues. With significant defined as greater than 10%, The Sabine Mining Company’s lease revenues to the Company approximated $3.2 million and $3.5 million for 2012 and 2011, respectively, or 26% of the Company’s total leasing and lending revenues for both years. These percentages are not expected to be comparable in future periods.

The equipment leasing industry is highly competitive. Equipment manufacturers, corporations, partnerships and others offer users an alternative to the purchase of most types of equipment with payment terms that vary widely depending on the lease term, type of equipment and creditworthiness of the lessee. The ability of the Company to keep the equipment leased and/or operating and the terms of the acquisitions, leases and dispositions of equipment depends on various factors (many of which are not in the control of AFS or the Company), such as raw material costs to manufacture equipment as well as general economic conditions, including the effects of inflation or recession, and fluctuations in supply and demand for various types of equipment resulting from, among other things, technological and economic obsolescence.

AFS limited the amount invested in equipment to any single lessee to not more than 20% of the aggregate purchase price of equipment owned at any time during the Reinvestment Period.

The business of the Company is not seasonal. The Company has no full time employees. AFS’ employees provide the services the Company requires to effectively operate. The cost of these services is reimbursed by the Company to AFS per the Operating Agreement.

Equipment Leasing Activities

The Company has acquired a diversified portfolio of equipment. The equipment has been leased to lessees in various industries.

2


 
 

TABLE OF CONTENTS

The following tables set forth the types of equipment acquired by the Company through December 31, 2012 and the industries to which the assets have been leased (dollars in thousands):

   
Asset Types   Purchase Price
Excluding
Acquisition Fees
  Percentage of
Total
Acquisitions
Mining equipment   $       45,530       25.60 % 
Materials handling     35,106       19.74 % 
Transportation, other     17,169       9.65 % 
Construction     16,352       9.20 % 
Aviation     13,644       7.67 % 
Transportation, rail     13,458       7.57 % 
Marine vessels     13,283       7.47 % 
Computers     6,143       3.45 % 
Logging/Lumber     4,176       2.35 % 
Manufacturing     4,004       2.25 % 
Agriculture     1,152       0.65 % 
Other     7,809       4.40 % 
     $ 177,826               100.00 % 

   
Industry of Lessee   Purchase Price
Excluding
Acquisition Fees
  Percentage of
Total
Acquisitions
Mining   $       44,228       24.87 % 
Transportation, other     25,960       14.60 % 
Manufacturing     19,256       10.83 % 
Electronics     16,926       9.52 % 
Retail     9,048       5.09 % 
Oil/Gas     8,709       4.90 % 
Health services     7,704       4.33 % 
Communications     7,561       4.25 % 
Transportation, rail     7,467       4.20 % 
Wood/Lumber products     7,307       4.11 % 
Transportation, marine     6,683       3.76 % 
Construction     5,365       3.02 % 
Paper products     4,549       2.56 % 
Other     7,063       3.96 % 
     $ 177,826               100.00 % 

From inception to December 31, 2012, the Company has disposed of certain leased assets as set forth below (in thousands):

     
Asset Types   Original
Equipment Cost
Excluding
Acquisition Fees
  Sale Price   Gross Rents
Materials handling   $      27,323     $       3,597     $       30,672  
Mining equipment     21,103       6,454       24,502  
Aviation     12,612       9,681       8,575  
Construction     12,106       3,056       10,048  
Computers     6,255       746       5,912  
Transportation, other     5,189       554       5,842  
Manufacturing     5,036       1,306       5,274  
Marine vessels     1,025             1,058  
Transportation, rail     274       188       181  
Other     5,002       2,227       4,235  
     $ 95,925     $ 27,809     $ 96,299  

3


 
 

TABLE OF CONTENTS

Proceeds from sales of lease assets are not expected to be consistent from one period to another. The Company is a finite life equipment leasing fund, which had acquired leasing transactions during the period ending six years after completion of its public offering. On the termination of leases, assets may be re-leased or sold. Sales of assets are not scheduled and are created by opportunities within the marketplace. The Company sought to acquire and lease a wide variety of assets and to enter into leases on a variety of terms. Some assets will be expected to have little or no value for re-lease or sale upon termination of the initial leases, and the anticipated residual values are a key factor in pricing and terms structured for each lease. The Company’s goal is to seek maximum return on its leased assets. It will determine when and under what terms to dispose of such assets during the course of its term.

For further information regarding the Company’s equipment lease portfolio performance, depreciation and impairment experience as of December 31, 2012 and 2011, see Note 6 to the financial statements, Investments in equipment and leases, net, as set forth in Part II, Item 8, Financial Statements and Supplementary Data.

Notes Receivable Activities

The Company finances a diversified portfolio of assets in diverse industries. The following tables set forth the types of assets financed by the Company through December 31, 2012 and the industries to which the assets have been financed (dollars in thousands):

   
Asset Types   Amount
Financed
Excluding
Acquisition Fees
  Percentage of
Total
Fundings
Computers   $        3,880       26.81 % 
Aircraft     2,680       18.52 % 
Storage facility     2,503       17.29 % 
Research     1,977       13.66 % 
Manufacturing     1,083       7.48 % 
Telecommunications     503       3.48 % 
Furniture/Fixtures     320       2.21 % 
Other     1,528       10.55 % 
     $ 14,474       100.00 % 

   
Industry of Borrower   Amount
Financed
Excluding
Acquisition Fees
  Percentage of
Total
Fundings
Manufacturing   $        4,086       28.23 % 
Communications     3,360       23.21 % 
Transportation     2,680       18.52 % 
Business services     1,911       13.20 % 
Health services     1,440       9.95 % 
Waste and recycling     500       3.45 % 
Electronics     350       2.42 % 
Industrial machinery     147       1.02 % 
     $ 14,474       100.00 % 

From inception to December 31, 2012, assets financed by the Company that are associated with terminated loans are as follows (in thousands):

     
Asset Types   Amount
Financed Excluding Acquisition Fees
  Disposition Proceeds   Total Payments Received
Computers   $      3,719     $     264     $     3,255  
Research     1,977       79       1,752  
Manufacturing     1,083             1,127  
Aircraft     536       440       732  
Telecommunications     503       287       374  
Furniture/Fixtures     320             272  
Other     528       197       432  
     $ 8,666     $ 1,267     $ 7,944  

4


 
 

TABLE OF CONTENTS

For further information regarding the Company’s notes receivable portfolio as of December 31, 2012, see Note 4 to the financial statements, Notes receivable, net, as set forth in Part II, Item 8, Financial Statements and Supplementary Data.

The Company operates in one reportable operating segment in the United States. For further information regarding the Company’s geographic revenues and assets, and major customers, see Notes 2 and 3 to the financial statements as set forth in Part II, Item 8, Financial Statements and Supplementary Data.

Item 2. PROPERTIES

The Company does not own or lease any real property, plant or material physical properties other than the equipment held for lease as set forth in Item 1, Business.

Item 3. LEGAL PROCEEDINGS

In the ordinary course of conducting business, there may be certain claims, suits, and complaints filed against the Company. In the opinion of management, the outcome of such matters, if any, will not have a material impact on the Company’s financial position or results of operations. No material legal proceedings are currently pending against the Company or against any of its assets.

Item 4. MINE SAFETY DISCLOSURES

Not applicable.

5


 
 

TABLE OF CONTENTS

PART II

Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

There are certain material conditions and restrictions on the transfer of Units imposed by the terms of the Operating Agreement. Consequently, there is no public market for Units and it is not anticipated that a public market for Units will develop. In the absence of a public market for the Units, there is no currently ascertainable fair market value for the Units.

Holders

As of December 31, 2012, a total of 3,089 investors were Unitholders of record in the Company.

ERISA Valuation

In order to permit ERISA fiduciaries who hold Units to satisfy their annual reporting requirements, AFS estimated the value per Unit of the Company’s assets as of December 31, 2012. AFS calculated the estimated liquidation proceeds that would be realized by the Company, assuming an orderly disposition of all of the Company’s assets as of December 31, 2012. The estimates were based on the amount of remaining lease payments on existing Company leases, and the estimated residual values of the equipment held by the Company upon the termination of those leases. This valuation was based solely on AFS’s perception of market conditions and the types and amounts of the Company’s assets. No independent valuation was sought.

After calculating the aggregate estimated disposition proceeds, AFS then calculated the portion of the aggregate estimated value of the Company assets that would be distributed to Unitholders on liquidation of the Company, and divided the total so distributable by the number of outstanding Units. As of December 31, 2012, the value of the Company’s assets, calculated on this basis, was approximately $2.08 per Unit. The foregoing valuation was performed solely for the ERISA purposes described above. There is no market for the Units, and, accordingly, this value does not represent an estimate of the amount a Unitholder would receive if he were to seek to sell his Units. Furthermore, there can be no assurance as to the amount the Company may actually receive if and when it seeks to liquidate its assets or the amount of lease payments and equipment disposition proceeds it will actually receive over the remaining term of the Company.

Distributions

The Unitholders of record are entitled to certain distributions as provided under the Operating Agreement. AFS has sole discretion in determining the amount of distributions; provided, however, that AFS will not reinvest in equipment, but will distribute, subject to payment of any obligations of the Company. The Company commenced periodic distributions, based on cash flows from operations, beginning with the month of February 2001.

The monthly distributions were discontinued in 2010 as the Company entered its liquidation phase. A total of four periodic distributions were paid in 2012 and 2011. The rate for each distribution was $0.15 per Unit. The rates and frequency of periodic distributions paid by the Fund during its liquidation phase are solely at the discretion of the Manager.

The following table presents summarized information regarding distributions to members other than the Managing Member (“Other Members”):

   
  2012   2011
Net income per Unit, based on weighted average Units outstanding   $    0.41     $   0.40  
Return of investment     0.19       0.20  
Distributions declared per Unit, based on weighted average Other Member Units outstanding     0.60       0.60  
Differences due to timing of distributions            
Actual distributions paid per Unit   $ 0.60     $ 0.60  
Item 6. SELECTED FINANCIAL DATA

A smaller reporting company is not required to present selected financial data in accordance with item 301(c) of Regulation S-K.

6


 
 

TABLE OF CONTENTS

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Statements contained in this Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (“MD&A”) and elsewhere in this Form 10-K, which are not historical facts, may be forward-looking statements. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. In particular, economic recession and changes in general economic conditions, including fluctuations in demand for equipment, lease rates, and interest rates, may result in delays in investment and reinvestment, delays in leasing, re-leasing, and disposition of equipment, and reduced returns on invested capital. The Company’s performance is subject to risks relating to lessee defaults and the creditworthiness of its lessees. The Fund’s performance is also subject to risks relating to the value of its equipment at the end of its leases, which may be affected by the condition of the equipment, technological obsolescence and the markets for new and used equipment at the end of lease terms. Investors are cautioned not to attribute undue certainty to these forward-looking statements, which speak only as of the date of this Form 10-K. We undertake no obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of this Form 10-K or to reflect the occurrence of unanticipated events, other than as required by law.

Overview

ATEL Capital Equipment Fund IX, LLC (the “Company” or the “Fund”) is a California limited liability company that was formed in September 2000 for the purpose of engaging in the sale of limited liability company investment units and acquiring equipment to generate revenues from equipment leasing, lending and sales activities, primarily in the United States. The Managing Member of the Company is ATEL Financial Services, LLC (“AFS”), a California limited liability company.

The Company conducted a public offering of 15,000,000 Limited Liability Company Units (“Units”), at a price of $10 per Unit. The offering was terminated in January 2003. During early 2003, the Company completed its initial acquisition stage with the investment of the net proceeds from the public offering of Units. Subsequently, during the reinvestment period (“Reinvestment Period”) (defined as six full years following the year the offering was terminated), the Company utilized its credit facilities and reinvested cash flow in excess of certain amounts required to be distributed to the Other Members to acquire additional equipment.

The Company may continue until December 31, 2020. However, pursuant to the guidelines of the Operating Agreement, the Company commenced liquidation phase activities subsequent to the end of the Reinvestment Period which ended on December 31, 2009. Periodic distributions are paid at the discretion of the Managing Member.

Results of Operations

As of December 31, 2012 and 2011, there were concentrations (greater than 10% as a percentage of total equipment cost) of equipment leased to lessees and/or financial borrowers in certain industries as follows:

   
  2012   2011
Mining     23 %      25 % 
Transportation, rail     18 %      14 % 
Marine transportation/Transportation, other     13 %      *  
Manufacturing     *       19 % 
Health care     *       13 % 
* Less than 10%

During 2012 and 2011, one lessee generated a significant portion of the Company’s total leasing and lending revenues. With significant defined as greater than 10%, The Sabine Mining Company’s lease revenues to the Company approximated $3.2 million and $3.5 million for 2012 and 2011, respectively, or 26% of the Company’s total leasing and lending revenues for both years. The percentages are not expected to be comparable in future periods due to anticipated changes in the mix of investments and/or lessees as a result of normal business activities.

It is the Company’s objective to maintain a 100% utilization rate for all equipment purchased in any given year. All equipment transactions are acquired subject to binding lease commitments, so equipment utilization is expected to remain high throughout the reinvestment stage. Initial lease terms of these leases are generally from 36 to 120 months,

7


 
 

TABLE OF CONTENTS

and as they expire, the Company will attempt to re-lease or sell the equipment; as such, utilization rates may tend to decrease during the liquidation stage of the Company. All of the Company’s equipment on lease was acquired in the years 2001 through 2010. The utilization percentage of existing assets under lease was 85% and 89% as of December 31, 2012 and 2011, respectively.

Cost reimbursements to the Managing Member are based on its costs incurred in performing administrative services for the Company. These costs are allocated to each managed entity based on certain criteria such as total assets, number of investors or contributed capital based upon the type of cost incurred.

The Operating Agreement places an annual limit and a cumulative limit for cost reimbursements to AFS and/or affiliates. Any reimbursable costs incurred by AFS and/or affiliates during the year exceeding the annual and/or cumulative limits cannot be reimbursed in the current year, though such costs may be recovered in future years to the extent of the cumulative limit. As of December 31, 2012, the Company has not exceeded the annual and/or cumulative limitations discussed above.

2012 versus 2011

The Company had net income of $5.6 million and $5.4 million for the years ended December 31, 2012 and 2011, respectively. The net results for 2012 reflect a decrease in total operating expenses offset, in part, by a decrease in total revenues when compared to prior year.

Revenues

Total revenues for 2012 decreased by $1.6 million, or 10%, as compared to prior year. The net reduction in total revenues was primarily a result of decreases in direct financing lease revenues, operating lease revenues, gain on sales of lease assets, interest on notes receivable and in gain on sale or disposition of securities. Such decreases in revenues were partially offset by a gain from settlement of a lease asset casualty.

Direct financing lease revenues declined by $717 thousand primarily due to run-off of the portfolio, and the early termination of a significant direct financing lease contract at the end of the second quarter of 2011. Operating lease revenues decreased by $490 thousand mainly due to the impact of continued run-off and dispositions of lease assets and the decrease in usage-based rental income. Such decreases in operating lease revenues were partially offset by incremental revenue from certain off-lease equipment that were leased in the third quarter of 2011.

Moreover, gain on sales of lease assets decreased by $460 thousand largely due to a reduction in volume and a change in the mix of assets sold. Interest on notes receivable was reduced by $112 thousand as result of continued run-off of the notes receivable portfolio; and, gain on sale or disposition of securities decreased by $74 thousand largely due to a year over year decline in warrant activity.

Partially offsetting the aforementioned decreases in revenues was a $350 thousand gain realized on settlement of a casualty claim relative to a total loss on a leased helicopter.

Expenses

Total expenses for 2012 decreased by $1.8 million, or 18%, as compared to prior year. The net decline in expenses was primarily due to decreases in depreciation expense, interest expense, asset management fees to AFS and costs reimbursed to AFS. Such decreases in expenses were partially offset by increases in the provision for credit losses and in marine vessel maintenance and other operating costs.

The decrease in depreciation expense totaled $1.7 million and was primarily attributable to run-off and sales of lease assets, and an increase in the number of assets that have been fully depreciated since December 31, 2011. Interest expense was reduced by $261 thousand mainly due to an approximate $4.0 million net decrease in outstanding borrowings since December 31, 2011. Moreover, management fees paid to AFS decreased by $127 thousand largely due to the continued decline in managed assets and related rents; and, costs reimbursed to AFS declined by $53 thousand largely due to lower costs allocated by the Manager based on the Company’s declining asset base, and operations, consistent with a Fund in liquidation.

Partially offsetting the aforementioned decreases in expenses were increases in the provision for credit losses and in marine vessel maintenance and other operating costs totaling $208 thousand and $171 thousand, respectively. The net

8


 
 

TABLE OF CONTENTS

provision for credit losses increased largely due to a year over year decrease in recovery of amounts previously reserved, and a $54 thousand second quarter 2012 fair value adjustment related to an impaired note. Marine vessel maintenance and other operating costs were higher as a result of increased vessel activity and costs of engine maintenance.

Capital Resources and Liquidity

At December 31, 2012 and 2011, the Company’s cash and cash equivalents totaled $5.2 million and $5.6 million, respectively. The liquidity of the Company varies, increasing to the extent cash flows from leases and proceeds of asset sales exceed expenses and decreasing as lease assets are acquired, as distributions are made to the Other Members and to the extent expenses exceed cash flows from leases and proceeds from asset sales.

The primary source of liquidity for the Company is its cash flow from leasing activities. As initial lease terms expire, the Company re-leases or sells the equipment. The future liquidity beyond the contractual minimum rentals will depend on the Company’s success in remarketing or selling the equipment as it comes off-rental.

If inflation in the general economy becomes significant, it may affect the Company in as much as the residual (resale) values and rates on re-leases of the Company’s leased assets may increase as the costs of similar assets increase. However, the Company’s revenues from existing leases would not increase; as such leasing rents and payments are generally fixed for the terms of the leases without adjustment for inflation. In addition, if interest rates increase significantly under such circumstances, the lease rates that the Company can obtain on future leases will be expected to increase as the cost of capital is a significant factor in the pricing of lease financing. Leases already in place, for the most part, would not be affected by changes in interest rates.

The Company currently believes it has available adequate reserves to meet its immediate cash requirements and those of the next twelve months, but in the event those reserves were found to be inadequate, the Company would likely be in a position to borrow against its current portfolio to meet such requirements. AFS envisions no such requirements for operating purposes.

Cash Flows

The following table sets forth summary cash flow data (in thousands):

   
  2012   2011
Net cash provided by (used in):
                 
Operating activities   $  8,250     $  8,945  
Investing activities     3,203       5,856  
Financing activities     (11,829 )      (11,990 ) 
Net (decrease) increase in cash and cash equivalents   $ (376 )    $ 2,811  

2012 versus 2011

During 2012 and 2011, the Company’s primary source of liquidity has been cash flows from its portfolio of operating and direct financing lease contracts, and its investments in notes receivable. In addition, the Company realized $689 thousand and $3.5 million of proceeds from sales or dispositions of equipment and investment securities for the respective years ended December 31, 2012 and 2011; and, received $440 thousand of proceeds from the settlement of a casualty claim relative to a total loss on a leased helicopter during the current year.

During each of 2012 and 2011, cash was primarily used to pay $7.8 million of distributions to both the Other Members and the Managing Member and to pay down $4.0 million and $4.2 million of debt. Cash was also used to pay invoices related to management fees and expenses during both years. During 2011, the Company used $442 thousand to pay for capitalized improvements on its marine vessel.

Non-Recourse Long-Term Debt

As of December 31, 2012, the Company had non-recourse long-term debt totaling $17.4 million. Such non-recourse notes payable do not contain any material financial covenants. The notes are secured by a lien granted by the Company to the non-recourse lenders on (and only on) the discounted lease transactions. The lenders have recourse only to the following collateral: the specific leased equipment; the related lease chattel paper; the lease receivables; and proceeds of the foregoing items.

9


 
 

TABLE OF CONTENTS

The Operating Agreement limits aggregate borrowings to 50% of the total cost of equipment. For detailed information on the Company’s non-recourse debt obligation, see Note 8 to the financial statements as set forth in Part II, Item 8, Financial Statements and Supplementary Data.

Receivable funding program

Prior to August 2011, the Company had a $60 million receivables funding program (the “RF Program”) with a receivables financing company that issued commercial paper rated A1 from Standard and Poor’s and P1 from Moody’s Investors Service. Under the RF Program, the lender held liens against the Company’s assets. The lender was in a first position against certain specified assets and was in either a subordinated or shared position against the remaining assets. The ability to draw down on the RF Program terminated on July 31, 2008. As of August 22, 2011, all advances under the RF Program were repaid in full and the program was terminated.

Distributions

The Company commenced periodic distributions, based on cash flows from operations, beginning with the month of February 2001. The monthly distributions were discontinued in 2010 as the Company entered its liquidation phase. The rates and frequency of periodic distributions paid by the Fund during its liquidation phase are solely at the discretion of the Manager. See Item 5, Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities, for additional information regarding the distributions.

Commitments and Contingencies and Off-Balance Sheet Transactions

Commitments and Contingencies

At December 31, 2012, the Company had no commitments to purchase lease assets or fund investments in notes receivable.

Gain Contingency

ATEL filed a claim on behalf of the Company and certain affiliated entities in Federal court in New Orleans for the under-reporting of revenue by a fleet manager of three marine vessels, seeking to recover an approximate amount of 10% of gross proceeds, which in the aggregate for all affiliated entities represents $2.8 million for the years 2005 – 2007 (of which the Company’s portion is an approximate $350 thousand). The annual allocable portion of the claim is not considered material to the Company in any given year. The trial was concluded during the first week of August 2012. As of October 10, 2012, the matter has been in the hands of the Federal Judge to render a decision on both the law and the facts. The decision of the Court is imminent, and the Company is hopeful for a recovery of all or portion of its asserted claims, but the outcome of the litigation remains uncertain as of such date. While the Company's recovery with respect to this matter may be significant, there is no assurance that judgment will be rendered in favor of the Company.

Off-Balance Sheet Transactions

None.

Recent Accounting Pronouncements

Recent accounting standards updates as issued by the Financial Accounting Standards Board (FASB) were evaluated and determined to be not applicable to the Company.

Critical Accounting Policies and Estimates

The policies discussed below are considered by management of the Company to be critical to an understanding of the Company’s financial statements because their application requires significantly complex or subjective judgments, decisions, or assessments, with financial reporting results relying on estimation about the effect of matters that are inherently uncertain. Specific risks for these critical accounting policies are described in the following paragraphs. The Company also states these accounting policies in the notes to the financial statements and in relevant sections in this discussion and analysis. For all of these policies, management cautions that future events rarely develop exactly as forecast, and the best estimates routinely require adjustment.

10


 
 

TABLE OF CONTENTS

Use of estimates:

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Such estimates primarily relate to the determination of residual values at the end of the lease term and expected future cash flows used for impairment analysis purposes and for determination of the allowance for doubtful accounts and reserve for credit losses on notes receivable.

Equipment on operating leases and related revenue recognition:

Equipment subject to operating leases is stated at cost. Depreciation is being recognized on a straight-line method over the terms of the related leases to the equipment’s estimated residual values. Maintenance costs associated with the Fund’s portfolio of leased assets are expensed as incurred. Major additions and betterments are capitalized.

Operating lease revenue is recognized on a straight-line basis over the term of the underlying leases. The initial lease terms will vary as to the type of equipment subject to the leases, the needs of the lessees and the terms to be negotiated, but initial leases are generally on terms from 36 to 120 months. The difference between rent received and rental revenue recognized is recorded as unearned operating lease income on the balance sheet.

Operating leases are generally placed in a non-accrual status (i.e., no revenue is recognized) when payments are more than 90 days past due. Additionally, management considers the equipment underlying the lease contracts for impairment and periodically reviews the credit worthiness of all operating lessees with payments outstanding less than 90 days. Based upon management’s judgment, the related operating leases may be placed on non-accrual status. Leases placed on non-accrual status are only returned to an accrual status when the account has been brought current and management believes recovery of the remaining unpaid lease payments is probable. Until such time, revenues are recognized on a cash basis.

The Company earns revenues from its marine vessel based on charter utilization of the vessel or a fixed term lease. When the vessel is chartered, contingent rentals and the associated expenses are recorded when earned and/or incurred. From time to time, the Company incurs “drydocking” costs on its vessel. Drydocking costs include labor and material costs related to refurbishing, overhauling and/or replacing engine and other major mechanical components of the vessel, hull maintenance and other repairs that bring the vessel into seaworthy compliance with U.S. marine codes in order to have it certified as available for charter. Such drydocking costs are capitalized and added to the equipment cost and depreciated over the period between scheduled drydockings, which generally occur every 24 to 30 months.

Direct financing leases and related revenue recognition:

Income from direct financing lease transactions is reported using the financing method of accounting, in which the Company’s investment in the leased property is reported as a receivable from the lessee to be recovered through future rentals. The interest income portion of each rental payment is calculated so as to generate a constant rate of return on the net receivable outstanding.

Allowances for losses on direct financing leases are typically established based on historical charge off and collection experience and the collectability of specifically identified lessees and billed and unbilled receivables. Direct financing leases are charged off to the allowance as they are deemed uncollectible.

Direct financing leases are generally placed in a non-accrual status (i.e., no revenue is recognized) and deemed impaired when payments are more than 90 days past due. Additionally, management periodically reviews the creditworthiness of all direct finance lessees with payments outstanding less than 90 days. Based upon management’s judgment, the related direct financing leases may be placed on non-accrual status. Leases placed on non-accrual status are only returned to an accrual status when the account has been brought current and management believes recovery of the remaining unpaid lease payments is probable. Until such time, all payments received are applied only against outstanding principal balances.

11


 
 

TABLE OF CONTENTS

Notes receivable, unearned interest income and related revenue recognition:

The Company records all future payments of principal and interest on notes as notes receivable which is then offset by the amount of any related unearned interest income. For financial statement purposes, the Company reports only the net amount of principal due on the balance sheet. The unearned interest is recognized over the term of the note and the income portion of each note payment is calculated so as to generate a constant rate of return on the net balance outstanding. Any fees or costs related to notes receivable are recorded as part of the net investment in notes receivable and amortized over the term of the loan.

Allowances for losses on notes receivable are typically established based on historical charge off and collection experience and the collectability of specifically identified borrowers and billed and unbilled receivables. Notes are considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal and/or interest when due according to the contractual terms of the note agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. If it is determined that a loan is impaired with regard to scheduled payments, the Company will perform an analysis of the note to determine if an impairment valuation reserve is necessary. This analysis considers the estimated cash flows from the note, or the collateral value of the property underlying the note when note repayment is collateral dependent. Any required valuation reserve is charged to earnings when determined; and notes are written off to the allowance for losses as they are deemed uncollectible.

Notes receivable are generally placed in a non-accrual status (i.e., no revenue is recognized) when payments are more than 90 days past due. Additionally, management periodically reviews the creditworthiness of companies with note payments outstanding less than 90 days. Based upon management’s judgment, notes may be placed in a non-accrual status. Notes placed on non-accrual status are only returned to an accrual status when the account has been brought current and management believes recovery of the remaining unpaid receivable is probable. Until such time, all payments received are applied only against outstanding principal balances.

Initial direct costs:

The Company capitalizes initial direct costs (“IDC”) associated with the origination and funding of lease assets and investments in notes receivable. IDC includes both internal costs (e.g., the costs of employees’ activities in connection with successful lease and loan originations) and external broker fees incurred with such originations. The costs are amortized on a lease by lease (or note by note) basis based on actual contract term using a straight-line method for operating leases and the effective interest rate method for direct financing leases and notes receivable. Upon disposal of the underlying lease or loan assets, both the initial direct costs and the associated accumulated amortization are relieved. Costs related to leases or notes receivable that are not consummated are not eligible for capitalization as initial direct costs and are expensed as acquisition expense.

Asset valuation:

Recorded values of the Company’s leased asset portfolio are periodically reviewed for impairment. An impairment loss is measured and recognized only if the estimated undiscounted future cash flows of the asset are less than their net book value. The estimated undiscounted future cash flows are the sum of the estimated residual value of the asset at the end of the asset’s expected holding period and estimates of undiscounted future rents. The residual value assumes, among other things, that the asset is utilized normally in an open, unrestricted and stable market. Short-term fluctuations in the market place are disregarded and it is assumed that there is no necessity either to dispose of a significant number of the assets, if held in quantity, simultaneously or to dispose of the asset quickly. Impairment is measured as the difference between the fair value (as determined by a valuation method using discounted estimated future cash flows, third party appraisals or comparable sales of similar assets as applicable based on asset type) of the assets and its carrying value on the measurement date.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See the Report of Independent Registered Public Accounting Firm, Financial Statements and Notes to Financial Statements attached hereto at pages 13 through 36.

12


 
 

TABLE OF CONTENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Members
ATEL Capital Equipment Fund IX, LLC

We have audited the accompanying balance sheets of ATEL Capital Equipment Fund IX, LLC (the “Company”) as of December 31, 2012 and 2011, and the related statements of income, changes in members’ capital, and cash flows for the years then ended. These financial statements are the responsibility of the Management of the Company’s Managing Member. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of ATEL Capital Equipment Fund IX, LLC as of December 31, 2012 and 2011, and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.

 
  /s/ Moss Adams LLP
San Francisco, California
March 12, 2013

13


 
 

TABLE OF CONTENTS

ATEL CAPITAL EQUIPMENT FUND IX, LLC
  
BALANCE SHEETS
  
DECEMBER 31, 2012 AND 2011
(In Thousands)

   
  2012   2011
ASSETS
                 
Cash and cash equivalents   $     5,217     $     5,593  
Accounts receivable, net of allowance for doubtful accounts of $55 at December 31, 2012 and $70 at December 31, 2011     880       900  
Notes receivable, net of unearned interest income of $123 and allowance for credit losses of $54 at December 31, 2012 and net of unearned interest income of $255
at December 31, 2011
    965       1,721  
Prepaid expenses and other assets     59       36  
Investment in securities     5        
Investments in equipment and leases, net of accumulated depreciation of $39,698 at December 31, 2012 and $41,511 at December 31, 2011     26,065       31,192  
Total assets   $ 33,191     $ 39,442  
LIABILITIES AND MEMBERS’ CAPITAL
                 
Accounts payable and accrued liabilities:
                 
Managing Member   $ 69     $ 76  
Other     454       467  
Deposits due lessees     49       49  
Non-recourse debt     17,384       21,394  
Unearned operating lease income     295       259  
Total liabilities     18,251       22,245  
Commitments and contingencies
                 
Members’ capital:
                 
Managing Member            
Other Members     14,940       17,197  
Total Members’ capital     14,940       17,197  
Total liabilities and Members’ capital   $ 33,191     $ 39,442  

See accompanying notes.

14


 
 

TABLE OF CONTENTS

ATEL CAPITAL EQUIPMENT FUND IX, LLC
  
STATEMENTS OF INCOME
  
FOR THE YEARS ENDED
DECEMBER 31, 2012 AND 2011
(In Thousands Except for Units and Per Unit Data)

   
  2012   2011
Revenues:
                 
Leasing and lending activities:
                 
Operating leases   $      8,934     $      9,424  
Direct financing leases     3,345       4,062  
Interest on notes receivable     132       244  
Gain on sales of lease assets and early termination of notes receivable     377       837  
Gain from settlement of lease asset casualty     350        
Unrealized gain on securities     5        
Gain on sale or disposition of securities and warrants     16       90  
Other revenue     142       201  
Total revenues     13,301       14,858  
Expenses:
                 
Depreciation of operating lease assets     3,273       4,927  
Asset management fees to Managing Member and/or affiliates     592       719  
Acquisition expense           (2 ) 
Cost reimbursements to Managing Member and/or affiliates     835       888  
Provision (reversal of provision) for credit losses     39       (169 ) 
Impairment losses     71       65  
Provision for losses on investment in securities           41  
Amortization of initial direct costs     25       38  
Other management fees     94       91  
Interest expense     1,263       1,524  
Professional fees     147       133  
Outside services     55       47  
Insurance     92       81  
Marine vessel maintenance and other operating costs     887       716  
Other     358       383  
Total operating expenses     7,731       9,482  
Other expense, net     (8 )      (5 ) 
Net income   $ 5,562     $ 5,371  
Net income:
                 
Managing Member   $ 586     $ 586  
Other Members     4,976       4,785  
     $ 5,562     $ 5,371  
Net income per Limited Liability Company Unit (Other Members)   $ 0.41     $ 0.40  
Weighted average number of Units outstanding     12,055,016       12,055,016  

See accompanying notes.

15


 
 

TABLE OF CONTENTS

ATEL CAPITAL EQUIPMENT FUND IX, LLC
  
STATEMENTS OF CHANGES IN MEMBERS’ CAPITAL
  
FOR THE YEARS ENDED
DECEMBER 31, 2012 AND 2011

(In Thousands Except for Units and Per Unit Data)

       
  Other Members   Managing Member   Total
     Units   Amount
Balance December 31, 2010     12,055,016     $    19,645     $       —     $    19,645  
Distributions to Other Members ($0.60 per Unit)           (7,233 )            (7,233 ) 
Distributions to Managing Member                 (586 )      (586 ) 
Net income           4,785       586       5,371  
Balance December 31, 2011     12,055,016       17,197             17,197  
Distributions to Other Members ($0.60 per Unit)           (7,233 )            (7,233 ) 
Distributions to Managing Member                 (586 )      (586 ) 
Net income           4,976       586       5,562  
Balance December 31, 2012     12,055,016     $ 14,940     $     $ 14,940  

See accompanying notes.

16


 
 

TABLE OF CONTENTS

ATEL CAPITAL EQUIPMENT FUND IX, LLC
  
STATEMENTS OF CASH FLOWS
  
FOR THE YEARS ENDED
DECEMBER 31, 2012 AND 2011
(In Thousands)

   
  2012   2011
Operating activities:
                 
Net income   $     5,562     $    5,371  
Adjustment to reconcile net income to cash provided by operating activities:
                 
Gain on sales of lease assets and early termination of notes receivable     (377 )      (837 ) 
Gain from settlement of lease asset casualty     (350 )       
Unrealized gain on securities     (5 )       
Gain on sales or disposition of securities     (16 )      (90 ) 
Depreciation of operating lease assets     3,273       4,927  
Amortization of initial direct costs     25       38  
Provision (reversal of provision) for credit losses     39       (169 ) 
Impairment losses     71       65  
Provision for losses on investment in securities           41  
Gain on interest rate swap contracts           (5 ) 
Changes in operating assets and liabilities:
                 
Accounts receivable     35       270  
Prepaid expenses and other assets     (23 )      3  
Accounts payable, Managing Member     (7 )      (6 ) 
Accounts payable, other     (13 )      (426 ) 
Deposits due lessees           (41 ) 
Unearned operating lease income     36       (196 ) 
Net cash provided by operating activities     8,250       8,945  
Investing activities:
                 
Purchases and improvements to operating leases           (442 ) 
Proceeds from sales of lease assets and early termination of notes receivable     673       3,374  
Proceeds from settlement of lease asset casualty     440        
Proceeds from sales or dispositions of securities     16       119  
Payments of initial direct costs           (2 ) 
Principal payments received on direct financing leases     1,374       2,008  
Principal payments received on notes receivable     700       799  
Net cash provided by investing activities     3,203       5,856  
Financing activities:
                 
Repayments under receivables funding program           (415 ) 
Repayments of non-recourse debt     (4,010 )      (3,756 ) 
Distributions to Other Members     (7,233 )      (7,233 ) 
Distributions to Managing Member     (586 )      (586 ) 
Net cash used in financing activities     (11,829 )      (11,990 ) 
Net (decrease) increase in cash and cash equivalents     (376 )      2,811  
Cash and cash equivalents at beginning of year     5,593       2,782  
Cash and cash equivalents at end of year   $ 5,217     $ 5,593  
Supplemental disclosures of cash flow information:
                 
Cash paid during the year for interest   $ 1,285     $ 1,545  
Cash paid during the year for taxes   $ 139     $ 139  

See accompanying notes.

17


 
 

TABLE OF CONTENTS

ATEL CAPITAL EQUIPMENT FUND IX, LLC
  
NOTES TO FINANCIAL STATEMENTS

1. Organization and Limited Liability Company matters:

ATEL Capital Equipment Fund IX, LLC (the “Company” or the “Fund”) was formed under the laws of the State of California on September 27, 2000 for the purpose of engaging in the sale of limited liability company investment units and acquiring equipment to engage in equipment leasing, lending and sales activities, primarily in the United States. The Managing Member of the Company is ATEL Financial Services, LLC (“AFS”), a California limited liability company. The Company may continue until December 31, 2020. Contributions in the amount of $600 were received as of December 31, 2000, $100 of which represented AFS’s continuing interest, and $500 of which represented the Initial Member’s capital investment.

The Company conducted a public offering of 15,000,000 Limited Liability Company Units (“Units”), at a price of $10 per Unit. On February 21, 2001, subscriptions for the minimum number of Units (120,000, representing $1.2 million) had been received (excluding subscriptions from Pennsylvania investors) and AFS requested that the subscriptions be released to the Company. On that date, the Company commenced operations in its primary business (acquiring equipment to engage in equipment leasing, lending and sales activities). As of April 3, 2001, the Company had received subscriptions for 753,050 Units ($7.5 million), thus exceeding the $7.5 million minimum requirement for Pennsylvania, and AFS requested that the remaining funds in escrow (from Pennsylvania investors) be released to the Company.

As of January 15, 2003, the offering was terminated. As of that date, the Company had received subscriptions for 12,065,266 Units ($120.7 million). Subsequent to January 15, 2003, Units totaling 10,250 were rescinded or repurchased and funds returned to investors (net of distributions paid and allocated syndication costs, as applicable). As of December 31, 2012, 12,055,016 Units remain issued and outstanding.

The Company’s principal objectives have been to invest in a diversified portfolio of equipment that (i) preserves, protects and returns the Company’s invested capital; (ii) generates regular distributions to the members of cash from operations and cash from sales or refinancing, with any balance remaining after certain minimum distributions to be used to purchase additional equipment during the reinvestment period (“Reinvestment Period”) (defined as six full years following the year the offering was terminated), which ended on December 31, 2009 and (iii) provides additional distributions following the Reinvestment Period and until all equipment has been sold. The Company is governed by the Limited Liability Company Operating Agreement (“Operating Agreement”), as amended. On January 1, 2010, the Company commenced liquidation phase activities pursuant to the guidelines of the Operating Agreement.

Pursuant to the terms of the Operating Agreement, AFS receives compensation and reimbursements for services rendered on behalf of the Company (See Note 7). The Company is required to maintain reasonable cash reserves for working capital, the repurchase of Units and contingencies. The repurchase of Units is solely at the discretion of AFS.

2. Summary of significant accounting policies:

Basis of presentation:

The accompanying balance sheets as of December 31, 2012 and 2011, and the related statements of income, changes in members’ capital, and cash flows for the years then ended, have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the Securities and Exchange Commission. Certain prior year amounts have been reclassified to conform to the current year presentation. These reclassifications had no significant effect on the reported financial position or results of operations.

Footnote and tabular amounts are presented in thousands, except as to Units and per Unit data.

In preparing the accompanying financial statements, the Company has reviewed, as determined necessary by the Managing Member, events that have occurred after December 31, 2012, up until the issuance of the financial statements. No events were noted which would require disclosure in the footnotes to the financial statements.

Use of estimates:

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements

18


 
 

TABLE OF CONTENTS

ATEL CAPITAL EQUIPMENT FUND IX, LLC
  
NOTES TO FINANCIAL STATEMENTS

2. Summary of significant accounting policies: - (continued)

and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Such estimates relate primarily to the determination of residual values at the end of the lease term and expected future cash flows used for impairment analysis purposes and determination of the allowance for doubtful accounts.

Cash and cash equivalents:

Cash and cash equivalents include cash in banks and cash equivalent investments such as U.S. Treasury instruments with original and/or purchased maturities of ninety days or less.

Credit risk:

Financial instruments that potentially subject the Company to concentrations of credit risk include cash and cash equivalents, operating and direct financing lease receivables, notes receivable and accounts receivable. The Company places the majority of its cash deposits in noninterest-bearing accounts with financial institutions that have no less than $10 billion in assets. Such deposits are insured up to $250 thousand. The remainder of the Funds’ cash is temporarily invested in U.S. Treasury denominated instruments. The concentration of such deposits and temporary cash investments is not deemed to create a significant risk to the Company. Accounts and notes receivable represent amounts due from lessees or borrowers in various industries, related to equipment on operating and direct financing leases or notes receivable.

Accounts receivable:

Accounts receivable represent the amounts billed under operating and direct financing lease contracts, and notes receivable which are due to the Company. Allowances for doubtful accounts are typically established based on historical charge off and collection experience and the collectability of specifically identified lessees and invoiced amounts. Accounts receivable deemed uncollectible are charged off to the allowance on a specific identification basis. Amounts recovered that were previously written-off are recorded as other income in the period received.

Equipment on operating leases and related revenue recognition:

Equipment subject to operating leases is stated at cost. Depreciation is being recognized on a straight-line method over the terms of the related leases to the equipment’s estimated residual values. Maintenance costs associated with the Fund’s portfolio of leased assets are expensed as incurred. Major additions and betterments are capitalized.

Operating lease revenue is recognized on a straight-line basis over the term of the underlying leases. The initial lease terms will vary as to the type of equipment subject to the leases, the needs of the lessees and the terms to be negotiated, but initial leases are generally on terms from 36 to 120 months. The difference between rent received and rental revenue recognized is recorded as unearned operating lease income on the balance sheet.

Operating leases are generally placed in a non-accrual status (i.e., no revenue is recognized) when payments are more than 90 days past due. Additionally, management considers the equipment underlying the lease contracts for impairment and periodically reviews the credit worthiness of all operating lessees with payments outstanding less than 90 days. Based upon management’s judgment, the related operating leases may be placed on non-accrual status. Leases placed on non-accrual status are only returned to an accrual status when the account has been brought current and management believes recovery of the remaining unpaid lease payments is probable. Until such time, revenues are recognized on a cash basis.

The Company earns revenues from its marine vessel based on charter utilization of the vessel or a fixed term lease. When the vessel is chartered, contingent rentals and the associated expenses are recorded when earned and/or incurred. From time to time, the Company incurs “drydocking” costs on its vessel. Drydocking costs include labor and material costs related to refurbishing, overhauling and/or replacing engine and other major mechanical components of the vessel, hull maintenance and other repairs that bring the vessel into seaworthy compliance with U.S. marine codes in order to have it certified as available for charter. Such drydocking costs are capitalized and added to the equipment cost and depreciated over the period between scheduled drydockings, which generally occur every 24 to 30 months.

19


 
 

TABLE OF CONTENTS

ATEL CAPITAL EQUIPMENT FUND IX, LLC
  
NOTES TO FINANCIAL STATEMENTS

2. Summary of significant accounting policies: - (continued)

Direct financing leases and related revenue recognition:

Income from direct financing lease transactions is reported using the financing method of accounting, in which the Company’s investment in the leased property is reported as a receivable from the lessee to be recovered through future rentals. The interest income portion of each rental payment is calculated so as to generate a constant rate of return on the net receivable outstanding.

Allowances for losses on direct financing leases are typically established based on historical charge off and collection experience and the collectability of specifically identified lessees and billed and unbilled receivables. Direct financing leases are charged off to the allowance as they are deemed uncollectible.

Direct financing leases are generally placed in a non-accrual status (i.e., no revenue is recognized) and deemed impaired when payments are more than 90 days past due. Additionally, management periodically reviews the creditworthiness of all direct finance lessees with payments outstanding less than 90 days. Based upon management’s judgment, the related direct financing leases may be placed on non-accrual status. Leases placed on non-accrual status are only returned to an accrual status when the account has been brought current and management believes recovery of the remaining unpaid lease payments is probable. Until such time, all payments received are applied only against outstanding principal balances.

Notes receivable, unearned interest income and related revenue recognition:

The Company records all future payments of principal and interest on notes as notes receivable which is then offset by the amount of any related unearned interest income. For financial statement purposes, the Company reports only the net amount of principal due on the balance sheet. The unearned interest is recognized over the term of the note and the income portion of each note payment is calculated so as to generate a constant rate of return on the net balance outstanding. Any fees or costs related to notes receivable are recorded as part of the net investment in notes receivable and amortized over the term of the loan.

Allowances for losses on notes receivable are typically established based on historical charge off and collection experience and the collectability of specifically identified borrowers and billed and unbilled receivables. Notes are considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal and/or interest when due according to the contractual terms of the note agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. If it is determined that a loan is impaired with regard to scheduled payments, the Company will perform an analysis of the note to determine if an impairment valuation reserve is necessary. This analysis considers the estimated cash flows from the note, or the collateral value of the property underlying the note when note repayment is collateral dependent. Any required valuation reserve is charged to earnings when determined; and notes are charged off to the allowance for losses as they are deemed uncollectible.

Notes receivable are generally placed in a non-accrual status (i.e., no revenue is recognized) when payments are more than 90 days past due. Additionally, management periodically reviews the creditworthiness of companies with note payments outstanding less than 90 days. Based upon management’s judgment, notes may be placed in a non-accrual status. Notes placed on non-accrual status are only returned to an accrual status when the account has been brought current and management believes recovery of the remaining unpaid receivable is probable. Until such time, all payments received are applied only against outstanding principal balances.

Initial direct costs:

The Company capitalizes initial direct costs (“IDC”) associated with the origination and funding of lease assets and investments in notes receivable. IDC includes both internal costs (e.g., the costs of employees’ activities in connection with successful lease and loan originations) and external broker fees incurred with such originations. The costs are amortized on a lease by lease (or note by note) basis based on actual contract term using a straight-line method for

20


 
 

TABLE OF CONTENTS

ATEL CAPITAL EQUIPMENT FUND IX, LLC
  
NOTES TO FINANCIAL STATEMENTS

2. Summary of significant accounting policies: - (continued)

operating leases and the effective interest rate method for direct financing leases and notes receivable. Upon disposal of the underlying lease or loan assets, both the initial direct costs and the associated accumulated amortization are relieved. Costs related to leases or notes receivable that are not consummated are not eligible for capitalization as initial direct costs and are expensed as acquisition expense.

Acquisition expense:

Acquisition expense represents costs which include, but are not limited to, legal fees and expenses, travel and communication expenses, cost of appraisals, accounting fees and expenses and miscellaneous expenses related to the selection and acquisition of equipment which are reimbursable to the Managing Member under the terms of the Operating Agreement. As the costs are not eligible for capitalization as initial direct costs, such amounts are expensed as incurred.

Asset valuation:

Recorded values of the Company’s leased asset portfolio are periodically reviewed for impairment. An impairment loss is measured and recognized only if the estimated undiscounted future cash flows of the asset are less than their net book value. The estimated undiscounted future cash flows are the sum of the estimated residual value of the asset at the end of the asset’s expected holding period and estimates of undiscounted future rents. The residual value assumes, among other things, that the asset is utilized normally in an open, unrestricted and stable market. Short-term fluctuations in the market place are disregarded and it is assumed that there is no necessity either to dispose of a significant number of the assets, if held in quantity, simultaneously or to dispose of the asset quickly. Impairment is measured as the difference between the fair value (as determined by a valuation method using discounted estimated future cash flows, third party appraisals or comparable sales of similar assets as applicable based on asset type) of the asset and its carrying value on the measurement date.

Segment reporting:

The Company is not organized by multiple operating segments for the purpose of making operating decisions or assessing performance. Accordingly, the Company operates in one reportable operating segment in the United States.

The Company’s principal decision makers are the Managing Member’s Chief Executive Officer and its Chief Financial Officer and Chief Operating Officer. The Company believes that its equipment leasing business operates as one reportable segment because: a) the Company measures profit and loss at the equipment portfolio level as a whole; b) the principal decision makers do not review information based on any operating segment other than the equipment leasing transaction portfolio; c) the Company does not maintain discrete financial information on any specific segment other than its equipment financing operations; d) the Company has not chosen to organize its business around different products and services other than equipment lease financing; and e) the Company has not chosen to organize its business around geographic areas.

The primary geographic regions in which the Company seeks leasing and lending opportunities are North America and Europe.

21


 
 

TABLE OF CONTENTS

ATEL CAPITAL EQUIPMENT FUND IX, LLC
  
NOTES TO FINANCIAL STATEMENTS

2. Summary of significant accounting policies: - (continued)

The table below summarizes geographic information relating to the sources, by nation, of the Company’s total revenues for the years ended December 31, 2012 and 2011 and long-lived assets as of December 31, 2012 and 2011 (dollars in thousands):

       
  For the year ended December 31,
     2012   % of Total   2011   % of Total
Revenue
                                   
United States   $  12,653           95 %    $  14,023           94 % 
United Kingdom     361       3 %      438       3 % 
Canada     287       2 %      397       3 % 
Total International     648       5 %      835       6 % 
Total   $ 13,301       100 %    $ 14,858       100 % 

       
  As of December 31,
     2012   % of Total   2011   % of Total
Long-lived assets
                                   
United States   $  25,571             98 %    $  30,424             97 % 
Canada     340       1 %      586       2 % 
United Kingdom     154       1 %      182       1 % 
Total International     494       2 %      768       3 % 
Total   $ 26,065       100 %    $ 31,192       100 % 

Derivative financial instruments:

The Company records all derivatives as either assets or liabilities in the balance sheet, measures those instruments at fair value and recognizes the offsetting gains or losses as adjustments to net income (loss). Credit exposure from derivative financial instruments that are assets arises from the risk of a counterparty default on the derivative contract. The amount of the loss created by the default is the replacement cost or current positive fair value of the defaulted contract. All of the Company’s derivative contracts terminated during 2011 (See Note 9).

Foreign currency transactions:

Foreign currency transaction gains and losses are reported in the results of operations as “other income” or “other expense” in the period in which they occur. Currently, the Company does not use derivative instruments to hedge its economic exposure with respect to assets, liabilities and firm commitments as the foreign currency transactions risks to date have not been significant. During the years ended December 31, 2012 and 2011, the Company recognized foreign currency losses totaling $8 thousand and $10 thousand, respectively, which are included in other expense, net for each of the reporting years.

Investment in securities:

Purchased securities

Purchased securities are generally not registered for public sale and are carried at cost. Such securities are adjusted to fair value if the fair value is less than the carrying value and such impairment is deemed by the Managing Member to be other than temporary. Factors considered by the Managing Member in determining fair value include, but are not limited to, available financial information, the issuer’s ability to meet its current obligations and indications of the issuer’s subsequent ability to raise capital. There were no impaired securities as of December 31, 2012 and 2011. However, the Company had deemed certain investment securities impaired during the first quarter of 2011 and recorded fair value adjustments totaling $41 thousand which reduced the cost basis of such investments. By the third quarter of 2011, the impaired investments were disposed of with minimal gain. The Fund recognized net losses of $11 thousand on sales and dispositions of investment securities during 2011. By comparison, the Fund did not sell or dispose of any investment securities during 2012.

22


 
 

TABLE OF CONTENTS

ATEL CAPITAL EQUIPMENT FUND IX, LLC
  
NOTES TO FINANCIAL STATEMENTS

2. Summary of significant accounting policies: - (continued)

Warrants

Warrants owned by the Company are not registered for public sale, but are considered derivatives and are carried at an estimated fair value on the balance sheet at the end of the year, as determined by the Managing Member. At December 31, 2012 and 2011, the Managing Member estimated the fair value of the warrants to be nominal in amount. During 2012 and 2011, the Company recognized an approximate $16 thousand and $101 thousand of gains on the net exercise of warrants.

Unearned operating lease income:

The Company records prepayments on operating leases as a liability under the caption of unearned operating lease income. The liability is recorded when prepayments are received and recognized as operating lease revenue over the period to which the prepayments relate using a straight-line method.

Income taxes:

The Company is treated as a partnership for federal income tax purposes. Pursuant to the provisions of Section 701 of the Internal Revenue Code, a partnership is not subject to federal income taxes. Accordingly, the Company has provided current income taxes for only those states which levy income taxes on partnerships. For the years ended December 31, 2012 and 2011, the related provision for state income taxes was approximately $99 thousand and $110 thousand, respectively. The Company does not have any entity level uncertain tax positions. The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions and is generally subject to examination by U.S. federal (or state and local) income tax authorities for three years from the filing of a tax return.

The tax bases of the Company’s net assets and liabilities vary from the amounts presented in these financial statements at December 31, 2012 and 2011 as follows (in thousands):

   
  2012   2011
Financial statement basis of net assets   $  14,940     $  17,197  
Tax basis of net assets (unaudited)     15,317       16,939  
Difference   $ (377 )    $ 258  

The primary differences between the tax bases of net assets and the amounts recorded in the financial statements are the result of differences in accounting for syndication costs and differences between the depreciation methods used in the financial statements and the Company’s tax returns.

The following reconciles the net income reported in these financial statements to the income reported on the Company’s federal tax return (unaudited) for each of the years ended December 31, 2012 and 2011 (in thousands):

   
  2012   2011
Net income per financial statements   $   5,562     $   5,371  
Tax adjustments (unaudited):
                 
Adjustment to depreciation expense     (802 )      (2,039 ) 
Provision for losses and doubtful accounts     (15 )      (169 ) 
Adjustments to revenues/other expenses     1,414       1,835  
Adjustments to gain on sales of assets     (87 )      2,048  
Other     125       101  
Income per federal tax return (unaudited)   $ 6,197     $ 7,147  

23


 
 

TABLE OF CONTENTS

ATEL CAPITAL EQUIPMENT FUND IX, LLC
  
NOTES TO FINANCIAL STATEMENTS

2. Summary of significant accounting policies: - (continued)

Other expense, net:

Other expense, net consists of gains and losses on interest rate swap contracts and gains and losses on foreign exchange transactions. The table below details the Company’s other expense, net for the years ended December 31, 2012 and 2011 (in thousands):

   
  2012   2011
Foreign currency loss   $      (8 )    $     (10 ) 
Change in fair value of interest rate swap contracts           5  
     $ (8 )    $ (5 ) 

Per Unit data:

Net income and distributions per Unit are based upon the weighted average number of Other Members’ Units outstanding during the period.

Recent accounting pronouncements:

Recent accounting standards updates as issued by the Financial Accounting Standards Board (FASB) were evaluated and determined to be not applicable to the Company.

3. Concentration of credit risk and major customers:

The Company leases equipment to lessees and provides debt financing to borrowers in diversified industries. Leases and notes receivable are subject to AFS’s credit committee review. The leases and notes receivable provide for the return of the equipment to the Company upon default.

As of December 31, 2012 and 2011, there were concentrations (greater than 10% as a percentage of total equipment cost) of equipment leased to lessees and/or financial borrowers in certain industries as follows:

   
  2012   2011
Mining     23 %      25 % 
Transportation, rail     18 %      14 % 
Marine transportation/Transportation, other     13 %       *  
Manufacturing      *       19 % 
Health care      *       13 % 
* Less than 10%

During 2012 and 2011, one lessee generated a significant portion of the Company’s total leasing and lending revenues. With significant defined as greater than 10%, The Sabine Mining Company’s lease revenues to the Company approximated $3.2 million and $3.5 million for 2012 and 2011, respectively, or 26% of the Company’s total leasing and lending revenues for both years. The percentages are not expected to be comparable in future periods due to anticipated changes in the mix of investments and/or lessees as a result of normal business activities.

4. Notes receivable, net:

The Company has various notes receivable from borrowers who have financed the purchase of equipment through the Company. At December 31, 2012, the original terms of the notes receivable are 36 to 120 months and bear interest at rates ranging from 8.4% to 16.2%. The notes are secured by the equipment financed. The notes mature from 2013 through 2016.

During the second quarter of 2012, a note was deemed to be impaired and placed in non-accrual status. As such, the Company recorded a fair value adjustment of $54 thousand which reduced the cost basis of the impaired note. As of December 31, 2012, such estimated impairment remained unchanged. As of such date, the note reflects a principal balance and net investment balance outstanding of $171 thousand and $117 thousand, respectively. Just prior to the end

24


 
 

TABLE OF CONTENTS

ATEL CAPITAL EQUIPMENT FUND IX, LLC
  
NOTES TO FINANCIAL STATEMENTS

4. Notes receivable, net: - (continued)

of the third quarter, past due amounts were received bringing the note current at September 30, 2012. Accordingly, the note was returned to accrual status effective October 1, 2012. There were no notes in non-accrual status as of December 31, 2012, and no notes impaired or in non-accrual status as of December 31, 2011.

As of December 31, 2012, the minimum future payments receivable are as follows (in thousands):

 
Year ending December 31, 2013
        558  
2014     229  
2015     166  
2016     188  
       1,141  
Less: portion representing unearned interest income     (123 ) 
       1,018  
Unamortized initial direct costs     1  
Less: allowance for credit losses     (54 ) 
Notes receivable, net   $ 965  

IDC amortization expense related to notes receivable and the Company’s operating and direct financing leases for the years ended December 31, 2012 and 2011 are as follows (in thousands):

   
  2012   2011
IDC amortization – notes receivable   $      2     $       5  
IDC amortization – lease assets     23       33  
Total   $ 25     $ 38  

5. Allowance for credit losses:

The Company’s allowance for credit losses are as follows (in thousands):

           
  Accounts Receivable Allowance
for Doubtful Accounts
  Valuation Adjustments on
Financing Receivables
  Total
Allowance for
Credit Losses
     Notes
Receivable
  Finance
Leases
  Operating
Leases
  Notes
Receivable
  Finance
Leases
Balance December 31, 2010   $     19     $     46     $    174     $      —     $      —     $      239  
Reversal of provision     (19 )      (36 )      (114 )                  (169 ) 
Balance December 31, 2011           10       60                   70  
(Reversal of provision) provision           (3 )      (12 )      54             39  
Balance December 31, 2012   $     $ 7     $ 48     $ 54     $     $ 109  

Accounts Receivable

Accounts receivable represent the amounts billed under operating and direct financing lease contracts, and notes receivable which are currently due to the Company.

Allowances for doubtful accounts are typically established based upon their aging and historical charge off and collection experience and the creditworthiness of specifically identified lessees and borrowers, and invoiced amounts. Accounts receivable deemed uncollectible are generally charged off against the allowance on a specific identification basis. Recoveries of amounts that were previously written-off are recorded as other income in the period received. Accounts receivable are generally placed in a non-accrual status (i.e., no revenue is recognized) when payments are more than 90 days past due. Additionally, management periodically reviews the creditworthiness of companies with lease or note payments outstanding less than 90 days. Based upon management’s judgment, such leases or notes may be placed in non-accrual status. Leases or notes placed on non-accrual status are only returned to an accrual status

25


 
 

TABLE OF CONTENTS

ATEL CAPITAL EQUIPMENT FUND IX, LLC
  
NOTES TO FINANCIAL STATEMENTS

5. Allowance for credit losses: - (continued)

when the account has been brought current and management believes recovery of the remaining unpaid receivable is probable. Until such time, revenues on operating leases are recognized on a cash basis. All payments received on amounts billed under direct financing leases contracts and notes receivable are applied only against outstanding principal balances.

Financing Receivables

In addition to the allowance established for delinquent accounts receivable, the total allowance related solely to financing receivables also includes anticipated impairment charges on notes receivable and direct financing leases.

Notes are considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal and/or interest when due according to the contractual terms of the note agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest when due. If it is determined that a loan is impaired with regard to scheduled payments, the Company will perform an analysis of the note to determine if an impairment valuation reserve is necessary. This analysis considers the estimated cash flows from the note, or the collateral value of the property underlying the note when note repayment is collateral dependent. Any required valuation reserve is charged to earnings when determined; and notes are charged off to the allowance as they are deemed uncollectible.

The asset underlying a direct financing lease contract is considered impaired if the estimated undiscounted future cash flows of the asset are less than its net book value. The estimated undiscounted future cash flows are the sum of the estimated residual value of the asset at the end of the asset’s expected holding period and estimates of undiscounted future rents. The residual value assumes, among other things, that the asset is utilized normally in an open, unrestricted and stable market. Short-term fluctuations in the market place are disregarded and it is assumed that there is no necessity either to dispose of a significant number of the assets, if held in quantity, simultaneously or to dispose of the asset quickly. Impairment is measured as the difference between the fair value (as determined by a valuation method using discounted estimated future cash flows, third party appraisals or comparable sales of similar assets as applicable based on asset type) of the asset and its carrying value on the measurement date.

As of December 31, 2012 and 2011, the Company’s allowance for credit losses (related solely to financing receivables) and its recorded investment in financing receivables were as follows (in thousands):

     
December 31, 2012   Notes
Receivable
  Finance
Leases
  Total
Allowance for credit losses:
                          
Ending balance   $      54     $      —     $      54  
Ending balance: individually evaluated for impairment   $ 54     $     $ 54  
Ending balance: collectively evaluated for impairment   $     $     $  
Ending balance: loans acquired with deteriorated credit quality   $     $     $  
Financing receivables:
                          
Ending balance   $ 1,019 1     $ 12,477 2     $ 13,496  
Ending balance: individually evaluated for impairment   $ 1,019     $ 12,477     $ 13,496  
Ending balance: collectively evaluated for impairment   $     $     $  
Ending balance: loans acquired with deteriorated credit quality   $     $     $  

1 Includes $1 of unamortized initial direct costs.
2 Includes $24 of unamortized initial direct costs.

26


 
 

TABLE OF CONTENTS

ATEL CAPITAL EQUIPMENT FUND IX, LLC
  
NOTES TO FINANCIAL STATEMENTS

5. Allowance for credit losses: - (continued)

     
December 31, 2011   Notes Receivable   Finance Leases   Total
Allowance for credit losses:
                          
Ending balance   $      —     $      —     $      —  
Ending balance: individually evaluated for impairment   $     $     $  
Ending balance: collectively evaluated for impairment   $     $     $  
Ending balance: loans acquired with deteriorated credit quality   $     $     $  
Financing receivables:
                          
Ending balance   $ 1,721 3     $ 13,891 4     $ 15,612  
Ending balance: individually evaluated for impairment   $ 1,721     $ 13,891     $ 15,612  
Ending balance: collectively evaluated for impairment   $     $     $  
Ending balance: loans acquired with deteriorated credit quality   $     $     $  

3 Includes $3 of unamortized initial direct costs.
4 Includes $39 of unamortized initial direct costs.

The Company evaluates the credit quality of its financing receivables on a scale equivalent to the following quality indicators related to corporate risk profiles:

Pass – Any account whose lessee/debtor, co-lessee/debtor or any guarantor has a credit rating on publicly traded or privately placed debt issues as rated by Moody’s or S&P for either Senior Unsecured debt, Long Term Issuer rating or Issuer rating that are in the tiers of ratings generally recognized by the investment community as constituting an Investment Grade credit rating; or, has been determined by the Manager to be an Investment Grade Equivalent or High Quality Corporate Credit per its Credit Policy or has a Not Rated internal rating by the Manager and the account is not considered by the Chief Credit Officer of the manager to fall into one of the three risk profiles below.

Special Mention – Any traditional corporate type account with potential weaknesses (e.g. large net losses or major industry downturns) or, any growth capital account that has less than three months of cash as of the end of the calendar quarter to fund their continuing operations. These accounts deserve management’s close attention. If left uncorrected, those potential weaknesses may result in deterioration of the Fund’s receivable at some future date.

Substandard – Any account that is inadequately protected by the current worth and paying capacity of the borrower or of the collateral pledged, if any. Accounts that are so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Fund will sustain some loss as the likelihood of fully collecting all receivables may be questionable if the deficiencies are not corrected. Such accounts are on the Manager’s Credit Watch List.

Doubtful – Any account where the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Accordingly, an account that is so classified is on the Manager’s Credit Watch List, and has been declared in default and the Manager has repossessed, or is attempting to repossess, the equipment it financed. This category includes impaired notes and leases as applicable.

27


 
 

TABLE OF CONTENTS

ATEL CAPITAL EQUIPMENT FUND IX, LLC
  
NOTES TO FINANCIAL STATEMENTS

5. Allowance for credit losses: - (continued)

At December 31, 2012 and 2011, the Company’s financing receivables by credit quality indicator and by class of financing receivables are as follows (excludes initial direct costs) (in thousands):

       
  Notes Receivable   Finance Leases
     2012   2011   2012   2011
Pass   $       259     $      642     $    12,426     $    13,754  
Special mention     759       1,076       27       98  
Substandard                        
Doubtful                        
Total   $ 1,018     $ 1,718     $ 12,453     $ 13,852  

As of December 31, 2012, the Company’s impaired loans were as follows (in thousands):

         
  Impaired Loans
     Recorded Investment   Unpaid Principal Balance   Related Allowance   Average Recorded Investment   Interest Income Recognized
With no related allowance recorded
                                            
Notes receivable   $       —     $       —     $       —     $       —     $       —  
With an allowance recorded
Notes receivable
    117       171       54       190       19  
Total   $ 117     $ 171     $ 54     $ 190     $ 19  

There were no impaired loans at December 31, 2011.

As of December 31, 2012 and 2011, the investment in financing receivables is aged as follows (in thousands):

             
December 31, 2012   30 – 59 Days
Past Due
  60 – 89 Days
Past Due
  Greater Than
90 Days
  Total Past Due   Current   Total Financing Receivables   Recorded Investment>90 Days and Accruing
Notes receivable   $       —     $       —     $       —     $       —     $    1,018     $    1,018     $        —  
Finance leases     22             1       23       12,430       12,453       1  
Total   $ 22     $     $ 1     $ 23     $ 13,448     $ 13,471     $ 1  

             
December 31, 2011   30 – 59 Days
Past Due
  60 – 89 Days
Past Due
  Greater Than
90 Days
  Total Past Due   Current   Total Financing Receivables   Recorded Investment>90 Days and Accruing
Notes receivable   $       —     $       —     $       —     $       —     $    1,718     $    1,718     $       —  
Finance leases     4             7       11       13,841       13,852       7  
Total   $ 4     $     $ 7     $ 11     $ 15,559     $ 15,570     $ 7  

As discussed in Note 4, the Company deemed a note to be impaired and recorded a fair value adjustment of $54 thousand during the second quarter of 2012 to reduce the cost basis of the impaired note. As of December 31, 2012, such estimated impairment remained unchanged. As of the same date, the note reflects a principal balance and net investment balance outstanding of $171 thousand and $117 thousand, respectively. Just prior to the end of the third quarter, past due amounts were received bringing the note current at September 30, 2012. Accordingly, the note was returned to accrual status effective October 1, 2012. There were no notes in non-accrual status as of December 31, 2012, and no notes impaired or in non-accrual status as of December 31, 2011.

As of December 31, 2012 and 2011, certain net investments in financing receivables, with related accounts receivable past due more than 90 days, were still on an accrual basis based upon management’s assessment of the collectability of such receivables. However, the related accounts receivable were fully reserved and included in the allowance for doubtful accounts presented above.

28


 
 

TABLE OF CONTENTS

ATEL CAPITAL EQUIPMENT FUND IX, LLC
  
NOTES TO FINANCIAL STATEMENTS

6. Investment in equipment and leases, net:

The Company’s investment in leases consists of the following (in thousands):

       
  Balance
December 31,
2011
  Reclassifications,
Additions/
Dispositions and
Impairment Losses
  Depreciation/
Amortization
Expense or
Amortization of
Leases
  Balance
December 31,
2012
Net investment in operating leases   $    15,657     $      (1,098 )    $      (3,268 )    $    11,291  
Net investment in direct financing leases     13,852       (25 )      (1,374 )      12,453  
Assets held for sale or lease, net     1,628       666       (5 )      2,289  
Initial direct costs, net of accumulated amortization of $82 and $78 at December 31, 2012 and 2011, respectively     55             (23 )      32  
Total   $ 31,192     $ (457 )    $ (4,670 )    $ 26,065  

For the years ended December 31, 2012 and 2011, IDC amortization expense related to operating leases and direct financing leases was $23 thousand and $33 thousand, respectively (See Note 4).

Impairment of investments in leases and assets held for sale or lease:

Management periodically reviews the carrying values of its assets on leases and assets held for lease or sale. Impairment losses are recorded as an adjustment to the net investment in operating leases. In both 2012 and 2011, the Company deemed certain equipment to be impaired and recorded fair value adjustments of approximately $71 thousand and $65 thousand, respectively, to reduce the cost basis of such assets. As of December 31, 2012 and 2011, there were no lease contracts placed in non-accrual status. As of the same dates, the Company had certain other leases with related accounts receivable aged 90 days or more that had not been placed on non-accrual status. In accordance with Company policy, the related accounts receivable were fully reserved. Management continues to closely monitor these leases for any actual change in collectability status and indication of necessary valuation adjustments.

The Company utilizes a straight line depreciation method for equipment in all of the categories currently in its portfolio of operating lease transactions. Depreciation expense on the Company’s equipment was approximately $3.3 million and $4.9 million for the respective years ended December 31, 2012 and 2011. All of the leased property was acquired during the years 2001 through 2010.

Operating leases:

Property on operating leases consists of the following (in thousands):

       
  Balance.
December 31,
2011
  Additions   Reclassifications,
Dispositions and Impairment Losses
  Balance
December 31,
2012
Transportation, other   $     16,205     $        —     $     (5,766 )    $      10,439  
Transportation, rail     11,900             (9 )      11,891  
Marine vessels     7,258             1,700       8,958  
Materials handling     9,169             (6,230 )      2,939  
Manufacturing     2,368             (312 )      2,056  
Natural gas compressors     1,671                   1,671  
Construction     1,584                   1,584  
Agriculture     1,151                   1,151  
Other     84             (38 )      46  
       51,390             (10,655 )      40,735  
Less accumulated depreciation     (35,733 )      (3,268 )      9,557       (29,444 ) 
Total   $ 15,657     $ (3,268 )    $ (1,098 )    $ 11,291  

29


 
 

TABLE OF CONTENTS

ATEL CAPITAL EQUIPMENT FUND IX, LLC
  
NOTES TO FINANCIAL STATEMENTS

6. Investment in equipment and leases, net: - (continued)

The average estimated residual value for assets on operating leases was 16% and 18% of the assets’ original cost at December 31, 2012 and 2011, respectively. There were no operating leases placed in non-accrual status as of December 31, 2012 and 2011.

The Company may earn revenues from its containers, marine vessel and certain other assets based on utilization of such assets or a fixed-term lease. Contingent rentals (i.e., short-term, operating charter hire payments) and the associated expenses are recorded when earned and/or incurred. The revenues associated with these rentals are included as a component of Operating Lease Revenues and totaled $32 thousand and $201 thousand during the years ended December 31, 2012 and 2011, respectively.

During the third quarter of 2012, certain operating lease equipment suffered a total casualty loss. Pursuant to the lease agreement, the Company recorded a receivable totaling $440 thousand, of which $350 thousand represents calculated gain on the casualty loss. The receivable represents a combination of proceeds for the value of the lost asset and related lost revenue for the remaining term of the lease.

Direct financing leases:

As of December 31, 2012, investment in direct financing leases consists of materials handling, research, mining and construction equipment. As of December 31, 2011, such investment consists of materials handling and mining equipment as well as office furniture. The following lists the components of the Company’s investment in direct financing leases as of December 31, 2012 and 2011 (in thousands):

   
  2012   2011
Total minimum lease payments receivable   $    17,118     $    21,780  
Estimated residual values of leased equipment (unguaranteed)     3,569       3,644  
Investment in direct financing leases     20,687       25,424  
Less unearned income     (8,234 )      (11,572 ) 
Net investment in direct financing leases   $ 12,453     $ 13,852  

There was no investment in direct financing lease assets in non-accrual status at December 31, 2012 and 2011. However, at both December 31, 2012 and 2011, the Company had certain direct financing leases with related accounts receivable aged 90 days or more that have not been placed on non-accrual status. In accordance with Company policy, the related receivables were fully reserved and included in the allowance for doubtful accounts presented in Note 5.

At December 31, 2012, the aggregate amounts of future minimum lease payments receivable are as follows (in thousands):

     
  Operating
Leases
  Direct
Financing
Leases
  Total
Year ending December 31, 2013   $     4,261     $     4,534     $      8,795  
2014     2,715       4,450       7,165  
2015     1,403       4,450       5,853  
2016     378       3,684       4,062  
2017     350             350  
Thereafter     410             410  
     $ 9,517     $ 17,118     $ 26,635  

7. Related party transactions:

The terms of the Operating Agreement provide that AFS and/or affiliates are entitled to receive certain fees for equipment management and resale and for management of the Company.

The Operating Agreement allows for the reimbursement of costs incurred by AFS for providing administrative services to the Company. Administrative services provided include Company accounting, finance/treasury, investor relations,

30


 
 

TABLE OF CONTENTS

ATEL CAPITAL EQUIPMENT FUND IX, LLC
  
NOTES TO FINANCIAL STATEMENTS

7. Related party transactions: - (continued)

legal counsel and lease and equipment documentation. AFS is not reimbursed for services whereby it is entitled to receive a separate fee as compensation for such services, such as management of equipment. The Company will be liable for certain future costs to be incurred by AFS to manage the administrative services provided to the Company.

Each of ATEL Leasing Corporation (“ALC”) and AFS is a wholly-owned subsidiary of ATEL Capital Group and performs services for the Company. Acquisition services, equipment management, lease administration and asset disposition services are performed by ALC; investor relations, communications services and general administrative services for the Company are performed by AFS.

Cost reimbursements to the Managing Member are based on its costs incurred in performing administrative services for the Company. These costs are allocated to each managed entity based on certain criteria such as total assets, number of investors or contributed capital based upon the type of cost incurred. The Operating Agreement places an annual limit and a cumulative limit for cost reimbursements to AFS and/or affiliates. Any reimbursable costs incurred by AFS and/or affiliates during the year exceeding the annual and/or cumulative limits cannot be reimbursed in the current year, though such costs may be recovered in future years to the extent of the cumulative limit. As of December 31, 2012, the Company has not exceeded the annual and/or cumulative limitations discussed above.

AFS and/or affiliates earned fees, commissions and reimbursements, pursuant to the Operating Agreement as follows during each of the years ended December 31, 2012 and 2011 (in thousands):

   
  2012   2011
Costs reimbursed to Managing Member and/or affiliates   $     835     $     888  
Asset management fees to Managing Member and/or affiliates     592       719  
     $ 1,427     $ 1,607  

8. Non-recourse debt:

At December 31, 2012, non-recourse debt consists of notes payable to financial institutions. The notes are due in monthly installments. Interest on the notes is at fixed rates ranging from 6.16% to 6.66%. The notes are secured by assignments of lease payments and pledges of assets. At December 31, 2012, gross operating lease rentals and future payments on direct financing leases totaled approximately $19.4 million over the remaining lease terms; and the carrying value of the pledged assets is $15.3 million. The notes mature from 2015 through 2017.

The non-recourse debt does not contain any material financial covenants. The debt is secured by liens granted by the Company to the non-recourse lenders on (and only on) the discounted lease transactions. The lenders have recourse only to the following collateral: the specific leased equipment; the related lease chattel paper; the lease receivables; and proceeds of the foregoing items. The non-recourse obligation is payable solely out of the respective specific security and the Company does not guarantee (nor is the Company otherwise contractually responsible for) the payment of the non-recourse debt as a general obligation or liability of the Company. Although the Company does not have any direct or general liability in connection with the non-recourse debt apart from the security granted, the Company is directly and generally liable and responsible for certain representations, warranties, and covenants made to the lenders, such as warranties as to genuineness of the transaction parties' signatures, as to the genuineness of the respective lease chattel paper or the transaction as a whole, or as to the Company's good title to or perfected interest in the secured collateral, as well as similar representations, warranties and covenants typically provided by non-recourse borrowers and customary in the equipment finance industry, and are viewed by such industry as being consistent with non-recourse discount financing obligations. Accordingly, as there are no financial covenants or ratios imposed on the Company in connection with the non-recourse debt, the Company has determined that there are no material covenants with respect to the non-recourse debt that warrant footnote disclosure.

31


 
 

TABLE OF CONTENTS

ATEL CAPITAL EQUIPMENT FUND IX, LLC
  
NOTES TO FINANCIAL STATEMENTS

8. Non-recourse debt: - (continued)

Future minimum payments of non-recourse debt are as follows (in thousands):

     
  Principal   Interest   Total
Year ending December 31, 2013   $     4,279     $     1,015     $      5,294  
2014     4,568       726       5,294  
2015     4,616       420       5,036  
2016     3,743       133       3,876  
2017     178       1       179  
     $ 17,384     $ 2,295     $ 19,679  

9. Receivables funding program:

Prior to August 2011, the Company had a $60 million receivables funding program (the “RF Program”) with a receivables financing company that issued commercial paper rated A1 from Standard and Poor’s and P1 from Moody’s Investors Service. Under the RF Program, the lender held liens against the Company’s assets. The lender was in a first position against certain specified assets and was in either a subordinated or shared position against the remaining assets. The RF Program provided for borrowing at a variable interest rate; and, for the Company to enter into interest rate swap agreements with certain hedge counterparties (also rated A1/P1) to mitigate the interest rate risk associated with a variable interest rate note. The RF Program did not contain any credit risk related default contingencies. As of August 22, 2011, all advances under the RF Program were repaid in full and the program was terminated.

10. Commitments and contingencies:

At December 31, 2012, the Company had no commitments to purchase lease assets or fund investments in notes receivable.

Gain Contingency

ATEL filed a claim on behalf of the Company and certain affiliated entities in Federal court in New Orleans for the under-reporting of revenue by a fleet manager of three marine vessels, seeking to recover an approximate amount of 10% of gross proceeds, which in the aggregate for all affiliated entities represents $2.8 million for the years 2005 – 2007 (of which the Company’s portion is an approximate $350 thousand). The annual allocable portion of the claim is not considered material to the Company in any given year. The trial was concluded during the first week of August 2012. As of October 10, 2012, the matter has been in the hands of the Federal Judge to render a decision on both the law and the facts. The decision of the Court is imminent, and the Company is hopeful for a recovery of all or portion of its asserted claims, but the outcome of the litigation remains uncertain as of such date. While the Company's recovery with respect to this matter may be significant, there is no assurance that judgment will be rendered in favor of the Company.

11. Guarantees:

The Company enters into contracts that contain a variety of indemnifications. The Company’s maximum exposure under these arrangements is unknown. However, the Company has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.

The Managing Member knows of no facts or circumstances that would make the Company’s contractual commitments outside standard mutual covenants applicable to commercial transactions between businesses. Accordingly, the Company believes that these indemnification obligations are made in the ordinary course of business as part of standard commercial and industry practice, and that any potential liability under the Company’s similar commitments is remote. Should any such indemnification obligation become payable, the Company would separately record and/or disclose such liability in accordance with GAAP.

32


 
 

TABLE OF CONTENTS

ATEL CAPITAL EQUIPMENT FUND IX, LLC
  
NOTES TO FINANCIAL STATEMENTS

12. Members’ capital:

As of December 31, 2012 and 2011, 12,055,016 Units were issued and outstanding. The Company was authorized to issue up to 15,000,000 Units in addition to the Units issued to the initial member (50 Units).

The Company has the right, exercisable in the Manager’s discretion, but not the obligation, to repurchase Units of a Unitholder who ceases to be a U.S. Citizen, for a price equal to 100% of the holder’s capital account. The Company is otherwise permitted, but not required, to repurchase Units upon a holder’s request. The repurchase of Fund units is made in accordance with Section 13 of the Amended and Restated Limited Liability Company Operating Agreement. The repurchase would be at the discretion of the Manager on terms it determines to be appropriate under given circumstances, in the event that the Manager deems such repurchase to be in the best interest of the Company; provided, the Company is never required to repurchase any Units. Upon the repurchase of any Units by the Fund, the tendered Units are cancelled. Units repurchased in prior periods were repurchased at amounts representing the original investment less cumulative distributions made to the Unitholder with respect to the Units. All Units repurchased during a quarter are deemed to be repurchased effective the last day of the preceding quarter, and are not deemed to be outstanding during, or entitled to allocations of net income, net loss or distributions for the quarter in which such repurchase occurs.

As defined in the Operating Agreement, the Company’s Net Income, Net Losses, and Distributions are to be allocated 92.5% to the Members and 7.5% to AFS. In accordance with the terms of the Operating Agreement, additional allocations of income were made to AFS in 2012 and 2011. The amounts allocated were determined to bring AFS’s ending capital account balance to zero at the end of each year.

Distributions to the Other Members were as follows (in thousands except Units and per Unit data):

   
  2012   2011
Distributions declared   $       7,233     $      7,233  
Weighted average number of Units outstanding     12,055,016       12,055,016  
Weighted average distributions per Unit   $ 0.60     $ 0.60  

13. Fair value measurements:

Fair value measurements and disclosures are based on a fair value hierarchy as determined by significant inputs used to measure fair value. The three levels of inputs within the fair value hierarchy are defined as follows:

Level 1 – Quoted prices in active markets for identical assets or liabilities. An active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis, generally on a national exchange.

Level 2 – Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuations in which all significant inputs are observable in the market.

Level 3 – Valuation is modeled using significant inputs that are unobservable in the market. These unobservable inputs reflect the Company's own estimates of assumptions that market participants would use in pricing the asset or liability.

The Company had no assets or liabilities that require measurement at fair value on a recurring basis at December 31, 2012 and 2011.

During 2012, the Company recorded non-recurring adjustments to reflect the fair values of certain impaired off-lease equipment and notes receivable. By comparison, during 2011, the Company recorded fair value adjustments to reflect the fair value of impaired off-lease equipment and an impaired investment security. Amounts at December 31, 2012 and 2011 reflect the fair value of the then existing impaired assets.

The Company’s valuation policy is determined by members of the Asset Management, Credit and Accounting departments. Whenever possible, the policy is to obtain quoted market prices in active markets to estimate fair values for recognition and disclosure purposes. Where quoted market prices in active markets are not available, fair values are estimated using discounted cash flow analyses, broker quotes, information from third party remarketing agents, third

33


 
 

TABLE OF CONTENTS

ATEL CAPITAL EQUIPMENT FUND IX, LLC
  
NOTES TO FINANCIAL STATEMENTS

13. Fair value measurements: - (continued)

party appraisals of collateral and/or other valuation techniques. These techniques are significantly affected by certain of the Company’s assumptions, including discount rates and estimates of future cash flows. Potential taxes and other transaction costs are not considered in estimating fair values. As the Company is responsible for determining fair value, an analysis is performed on prices obtained from third parties. Such analysis is performed by asset management and credit department personnel who are familiar with the Company’s investments in equipment, notes receivable and equity securities of venture companies. The analysis may include a periodic review of price fluctuations and validation of numbers obtained from a specific third party by reference to multiple representative sources.

The measurement methodologies are as follows:

Impaired notes receivable

The fair value of the Company’s notes receivable is estimated using either third party appraisals of collateral or discounted cash flow analyses based upon current market rates for similar types of lending arrangements, with adjustments for non-accrual loans as deemed necessary. During 2012, the Company had recorded $54 thousand of fair value adjustments to reduce the cost basis of a note deemed impaired. The adjustment was non-recurring and was based upon an independent appraisal of the underlying collateral. Under the Fair Value Measurements Topic of the FASB Accounting Standards Codification, the fair value of the impaired note receivable is classified within Level 3 of the valuation hierarchy. Such valuation utilizes a market approach technique and uses inputs from third party appraisers that utilize current market transactions as adjusted for certain factors specific to the underlying collateral. There were no impairment losses recorded on notes receivable during 2011.

Impaired off-lease equipment

During 2012 and 2011, the Company recorded $71 thousand and $65 thousand, respectively, of fair value adjustments which reduced the fair value of certain impaired off-lease equipment. The adjustments for both fiscal years were non-recurring. Under the Fair Value Measurements Topic of the FASB Accounting Standards Codification, the fair values of such impaired off-lease equipment are classified within Level 3 of the valuation hierarchy as the data sources utilized for the valuation of the assets reflect significant inputs that are unobservable in the market. Such valuation utilizes a market approach technique and uses inputs that reflect the sales price of similar assets sold by affiliates and/or information from third party remarketing agents not readily available in the market.

Impaired investment securities

The Company’s investment securities are not registered for public sale and are carried at cost. The investment securities are adjusted for impairment, if any, based upon factors which include, but are not limited to, available financial information, the issuer’s ability to meet its current obligations and indications of the issuer’s subsequent ability to raise capital. The Company did not record any fair value adjustments relative to impaired investment securities during 2012.

During the first quarter of 2011, the Company had recorded a fair value adjustment of $41 thousand which reduced the cost basis of an investment security deemed impaired at March 31, 2011. The non-recurring fair value adjustment was a result of an approximate 66% reduction in valuation based upon cash payments received in a private transaction whereby the Fund liquidated its warrant position. Such transaction was pursuant to the investee’s acquisition by a third party. Under the Fair Value Measurements Topic of the FASB Accounting Standards Codification, the fair value of the impaired investment is classified within Level 3 of the valuation hierarchy as the third party’s valuation of the investee included significant inputs that are unobservable in the market. The impaired security was disposed of during the second quarter of 2011. There were no additional fair value adjustments recorded against investment securities through December 31, 2011.

34


 
 

TABLE OF CONTENTS

ATEL CAPITAL EQUIPMENT FUND IX, LLC
  
NOTES TO FINANCIAL STATEMENTS

13. Fair value measurements: - (continued)

The following table presents the fair value measurement of assets and liabilities measured at fair value on a non-recurring basis and the level within the hierarchy in which the fair value measurements fall at December 31, 2012 and 2011 (in thousands):

       
  December 31,
2012
  Level 1 Estimated Fair Value   Level 2 Estimated Fair Value   Level 3 Estimated Fair Value
Assets measured at fair value on a non-recurring basis:
                                   
Impaired off-lease assets   $       2     $       —     $       —     $        2  
Impaired notes receivable, net     117                   117  

       
  December 31,
2011
  Level 1
Estimated
Fair Value
  Level 2
Estimated
Fair Value
  Level 3
Estimated
Fair Value
Assets measured at fair value on a non-recurring basis:
                                   
Impaired off-lease assets   $       88     $       —     $       —     $        88  

The following disclosure of the estimated fair value of financial instruments is made in accordance with the guidance provided by the Financial Instruments Topic of the FASB Accounting Standards Codification. Fair value estimates, methods and assumptions, set forth below for the Company’s financial instruments, are made solely to comply with the requirements of the Financial Instruments Topic and should be read in conjunction with the Company’s financial statements and related notes.

The Company has determined the estimated fair value amounts by using market information and valuation methodologies that it considers appropriate and consistent with the fair value accounting guidance. Considerable judgment is required to interpret market data to develop the estimates of fair value. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

Cash and cash equivalents

The recorded amounts of the Company’s cash and cash equivalents approximate fair value because of the liquidity and short-term maturity of these instruments.

Notes receivable

The fair value of the Company’s notes receivable is estimated using either third party appraisals of collateral or discounted cash flow analyses based upon current market rates for similar types of lending arrangements, with adjustments for impaired loans as deemed necessary.

Investment in securities

The Company’s investment securities are not registered for public sale and are carried at cost which management believes approximates fair value, as appropriately adjusted for impairment.

Non-recourse debt

The fair value of the Company’s non-recourse debt is estimated using discounted cash flow analyses, based upon current market borrowing rates for similar types of borrowing arrangements.

Commitments and Contingencies

Management has determined that the fair value of contingent liabilities (or guarantees) is not considered material because management believes there has been no event that has occurred wherein a guarantee liability has been incurred or will likely be incurred.

35


 
 

TABLE OF CONTENTS

ATEL CAPITAL EQUIPMENT FUND IX, LLC
  
NOTES TO FINANCIAL STATEMENTS

13. Fair value measurements: - (continued)

The following tables present a summary of the carrying value and fair value by level of financial instruments not recorded at fair value on the Company’s balance sheet at December 31, 2012 and 2011 (in thousands):

         
  Fair Value Measurements at December 31, 2012
     Carrying Amount   Level 1   Level 2   Level 3   Total
Financial assets:
                                   
Cash and cash equivalents   $     5,217     $     5,217     $      —     $     —     $     5,217  
Notes receivable, net     965                   965       965  
Investment in securities     5                   5       5  
Financial liabilities:
 
Non-recourse debt     17,384                   18,302       18,302  

         
  December 31, 2011
     Carrying Amount   Estimated
Fair Value
Financial assets:
                 
Cash and cash equivalents   $     5,593     $     5,593  
Notes receivable, net     1,721       1,721  
Financial liabilities:
                 
Non-recourse debt     21,394       22,674  

36


 
 

TABLE OF CONTENTS

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS’ ON ACCOUNTING AND FINANCIAL DISCLOSURES

None.

Item 9A. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

The Company’s Managing Member’s President and Chief Executive Officer, and Executive Vice President and Chief Financial Officer and Chief Operating Officer (“Management”), evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this report. Based on the evaluation of the Company’s disclosure controls and procedures, Management concluded that as of the end of the period covered by this report, the design and operation of these disclosure controls and procedures were effective.

The Company does not control the financial reporting process, and is solely dependent on the Management of the Managing Member, who is responsible for providing the Company with financial statements in accordance with generally accepted accounting principles in the United States. The Managing Member’s disclosure controls and procedures, as they are applicable to the Company, means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Act (15 U.S.C. 78a et seq.) is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control over Financial Reporting

The Management of the Managing Member is responsible for establishing and maintaining adequate internal control over financial reporting as that term is defined in Exchange Act Rule 13a-15(f) for the Company, and for performing an assessment of the effectiveness of internal control over financial reporting as of December 31, 2012. The internal control process of the Managing Member, as it is applicable to the Company, was designed to provide reasonable assurance to Management regarding the preparation and fair presentation of published financial statements, and includes those policies and procedures that:

(1) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles in the United States, and that the Company’s receipts and expenditures are being made only in accordance with authorization of the Management of the Managing Member; and
(2) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

All internal control processes, no matter how well designed, have inherent limitations. Therefore, even those processes determined to be effective can provide only reasonable assurance with respect to the reliability of financial statement preparation and presentation. Further, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

Management of the Managing Member assessed the effectiveness of its internal control over financial reporting, as it is applicable to the Company, as of December 31, 2012. In making this assessment, it used the criteria set forth in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on its assessment, Management of the Managing Member concluded that the Managing Member’s internal control over financial reporting, as it is applicable to the Company, was effective as of December 31, 2012.

37


 
 

TABLE OF CONTENTS

This annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to Section 989G of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which exempts non-accelerated filers from Section 404(b) of the Sarbanes-Oxley Act of 2002.

Changes in internal control

There were no changes in the Managing Member’s internal control over financial reporting, as it is applicable to the Company, during the quarter ended December 31, 2012 that have materially affected, or are reasonably likely to materially affect, the Managing Member’s internal control over financial reporting, as it is applicable to the Company.

38


 
 

TABLE OF CONTENTS

PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS

The registrant is a Limited Liability Company and, therefore, has no officers or directors.

ATEL Financial Services, LLC (“AFS”) is the Company’s Managing Member or Manager. AFS is controlled by ATEL Capital Group (“ACG” or “ATEL”), a holding company formed to control AFS and affiliated companies. The outstanding voting capital stock of ATEL Capital Group is owned 100% by Dean Cash.

Each of ATEL Leasing Corporation (“ALC”) and AFS is a wholly-owned subsidiary of ACG and performs services for the Company. Acquisition services, equipment management, lease administration and asset disposition services are performed by ALC; and investor relations, communications and general administrative services are performed by AFS.

The officers and directors of ATEL and its affiliates are as follows:

 
Dean L. Cash   President and Chief Executive Officer of ATEL Financial Services, LLC
(Managing Member)
Paritosh K. Choksi   Executive Vice President and Chief Financial Officer and Chief Operating Officer of ATEL Financial Services, LLC (Managing Member)
Vasco H. Morais   Executive Vice President, Secretary and General Counsel of
ATEL Financial Services, LLC (Managing Member)

Dean L. Cash, age 62, became chairman, president and chief executive officer of ATEL in April 2001. Mr. Cash joined ATEL as director of marketing in 1980 and served as a vice president since 1981, executive vice president since 1983 and a director since 1984. Prior to joining ATEL, Mr. Cash was a senior marketing representative for Martin Marietta Corporation, data systems division, from 1979 to 1980. From 1977 to 1979, he was employed by General Electric Corporation, where he was an applications specialist in the medical systems division and a marketing representative in the information services division. Mr. Cash was a systems engineer with Electronic Data Systems from 1975 to 1977, and was involved in maintaining and developing software for commercial applications. Mr. Cash received a B.S. degree in psychology and mathematics in 1972 and an M.B.A. degree with a concentration in finance in 1975 from Florida State University. Mr. Cash is an arbitrator with the American Arbitration Association and is qualified as a registered principal with the Financial Industry Regulatory Authority.

Paritosh K. Choksi, age 59, joined ATEL in 1999 as a director, senior vice president and its chief financial officer. He became its executive vice president and CFO/COO in April 2001. Prior to joining ATEL, Mr. Choksi was chief financial officer at Wink Communications, Inc. from 1997 to 1999. From 1977 to 1997, Mr. Choksi was with Phoenix American Incorporated, a financial services and management company, where he held various positions during his tenure, and was senior vice president, chief financial officer and director when he left the company. Mr. Choksi was involved in all corporate matters at Phoenix and was responsible for Phoenix’s capital market needs. He also served on the credit committee overseeing all corporate investments, including its venture lease portfolio. Mr. Choksi was a part of the executive management team which caused Phoenix’s portfolio to increase from $50 million in assets to over $2 billion. Mr. Choksi is a member of the board of directors of Syntel, Inc. Mr. Choksi received a bachelor of technology degree in mechanical engineering from the Indian Institute of Technology, Bombay; and an M.B.A. degree from the University of California, Berkeley.

Vasco H. Morais, age 54, joined ATEL in 1989 as general counsel. Mr. Morais manages ATEL’s legal department, which provides legal and contractual support in the negotiating, documenting, drafting, reviewing and funding of lease transactions. In addition, Mr. Morais advises on general corporate law matters, and assists on securities law issues. From 1986 to 1989, Mr. Morais was employed by the BankAmeriLease Companies, Bank of America’s equipment leasing subsidiaries, providing in-house legal support on the documentation of tax-oriented and non-tax oriented direct and leveraged lease transactions, vendor leasing programs and general corporate matters. Prior to the BankAmeriLease Companies, Mr. Morais was with the Consolidated Capital Companies in the Corporate and Securities Legal Department involved in drafting and reviewing contracts, advising on corporate law matters and securities law issues. Mr. Morais received a B.A. degree in 1982 from the University of California in Berkeley, a J.D. degree in 1986 from Golden Gate University Law School; and an M.B.A. (Finance) degree from Golden Gate University in 1997. Mr. Morais, an active member of the State Bar of California since 1986, served as co-chair of the Uniform Business Law Section of the State Bar of California and was inducted as a fellow of the American College of Commercial Finance Lawyers in 2010.

39


 
 

TABLE OF CONTENTS

Audit Committee

The board of directors of the Managing Member acts as the audit committee of the Company. Dean L. Cash and Paritosh K. Choksi are members of the board of directors of the Managing Member and are deemed to be financial experts. They are not independent of the Company.

Section 16(a) Beneficial Ownership Reporting Compliance

Based solely on a review of Forms 3, 4 and 5, the Company is not aware of any failures to file reports of beneficial ownership required to be filed during or for the year ended December 31, 2012.

Code of Ethics

A Code of Ethics that is applicable to the Company, including the Chief Executive Officer and Chief Financial Officer and Chief Operating Officer of its Managing Member, AFS, or persons acting in such capacity on behalf of the Company, is included as Exhibit 14.1 to this report.

Item 11. EXECUTIVE COMPENSATION

The registrant is a Limited Liability Company and, therefore, has no officers or directors.

Set forth hereinafter is a description of the nature of remuneration paid and to be paid to AFS and its affiliates. The amount of such remuneration paid in 2012 and 2011 is set forth in Item 8 of this report under the caption “Financial Statements and Supplementary Data — Notes to Financial Statements — Related party transactions,” at Note 7 thereof, which information is hereby incorporated by reference.

Asset Management Fee

The Company pays AFS an Asset Management Fee in an amount equal to 4% of Operating Revenues, which includes Gross Lease Revenues and Cash From Sales or Refinancing. The Asset Management Fee is paid on a monthly basis. The amount of the Asset Management Fee payable in any year is reduced for that year to the extent it would otherwise exceed the Asset Management Fee Limit, as described below. The Asset Management Fee is paid for services rendered by AFS and its affiliates in determining portfolio and investment strategies (i.e., establishing and maintaining the composition of the Equipment portfolio as a whole and the Company’s overall debt structure) and generally managing or supervising the management of the Equipment.

AFS supervises performance of among others activities, collection of lease revenues, monitoring compliance by lessees with the lease terms, assuring that Equipment is being used in accordance with all operative contractual arrangements, paying operating expenses and arranging for necessary maintenance and repair of Equipment in the event a lessee fails to do so, monitoring property, sales and use tax compliance and preparation of operating financial data. AFS intends to delegate all or a portion of its duties and the Asset Management Fee to one or more of its affiliates who are in the business of providing such services.

Asset Management Fee Limit:

The Asset Management Fee is subject to the Asset Management Fee Limit. The Asset Management Fee Limit is calculated each year during the Company’s term by calculating the total fees that would be paid to AFS if AFS were to be compensated on the basis of an alternative fee schedule, to include an Equipment Management Fee, Incentive Management Fee, and Equipment Resale/Re-Leasing Fee, plus AFS’s Carried Interest, as described below. To the extent that the amount paid to AFS as the Asset Management Fee plus its Carried Interest for any year would exceed the aggregate amount of fees calculated under this alternative fee schedule for the year, the Asset Management Fee and/or Carried Interest for that year is reduced to equal the maximum aggregate fees under the alternative fee schedule.

To the extent any such fees are reduced, the amount of such reduction will be accrued and deferred, and such accrued and deferred compensation would be paid to AFS in a subsequent period, but only if and to the extent that such deferred compensation would be payable within the Asset Management Fee Limit for the subsequent period. Any deferred fees which cannot be paid under the applicable limitations in any subsequent period through the date of liquidation would be forfeited by AFS upon liquidation.

40


 
 

TABLE OF CONTENTS

Alternative Fee Schedule:

For purposes of the Asset Management Fee Limit, the Company will calculate an alternative schedule of fees, including a hypothetical Equipment Management Fee, Incentive Management Fee, Equipment Resale/Re-Leasing Fee, and Carried Interest as follows:

An Equipment Management Fee will be calculated to equal the lesser of (i) 3.5% of annual Gross Revenues from Operating Leases and 2% of annual Gross Revenues from Full Payout Leases which contain Net Lease Provisions, or (ii) the fees customarily charged by others rendering similar services as an ongoing public activity in the same geographic location and for similar types of equipment. If services with respect to certain Operating Leases are performed by nonaffiliated persons under the active supervision of AFS or its affiliate, then the amount so calculated shall be 1% of Gross Revenues from such Operating Leases.

An Incentive Management Fee will be calculated to equal 4% of Distributions of Cash from Operations until Holders have received a return of their Original Invested Capital plus a Priority Distribution, and, thereafter, to equal a total of 7.5% of Distributions from all sources, including Sale or Refinancing Proceeds. In subordinating the increase in the Incentive Management Fee to a cumulative return of a Holder’s Original Invested Capital plus a Priority Distribution, a Holder would be deemed to have received Distributions of Original Invested Capital only to the extent that Distributions to the Holder exceed the amount of the Priority Distribution.

An Equipment Resale/Re-Leasing Fee will be calculated in an amount equal to the lesser of (i) 3% of the sale price of the Equipment, or (ii) one-half the normal competitive equipment sale commission charged by unaffiliated parties for resale services. Such fee would apply only after the Holders have received a return of their Original Invested Capital plus a Priority Distribution. In connection with the releasing of Equipment to lessees other than previous lessees or their affiliates, the fee would be in an amount equal to the lesser of (i) the competitive rate for comparable services for similar equipment, or (ii) 2% of the gross rental payments derived from the re-lease of such Equipment, payable out of each rental payment received by the Company from such re-lease.

A Carried Interest equal to 7.5% of all Distributions of Cash from Operations and Cash from Sales or Refinancing.

See Note 7 to the financial statements included in Item 8, Financial Statements and Supplementary Data, for amounts paid.

Managing Member’s Interest in Operating Proceeds

As defined in the Limited Liability Company Operating Agreement, the Company’s Net Income, Net Losses, and Distributions are to be allocated 92.5% to the Members and 7.5% to AFS. In accordance with the terms of the Operating Agreement, additional allocations of income were made to AFS in 2012 and 2011. The amounts allocated were determined to bring AFS’s ending capital account balance to zero at the end of each year. See financial statements as set forth in Part II, Item 8, Financial Statements and Supplementary Data, of this report for amounts allocated to AFS in 2012 and 2011.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Security Ownership of Certain Beneficial Owners

At December 31, 2012, no investor is known to hold beneficially more than 5% of the issued and outstanding Units.

Security Ownership of Management

The parent of AFS is the beneficial owner of Limited Liability Company Units as follows:

     
(1)
Title of Class
  (2)
Name and Address of
Beneficial Owner
  (3)
Amount and Nature of Beneficial Ownership
  (4)
Percent of
Class
Limited Liability Company Units   ATEL Capital Group
The Transamerica Pyramid
600 Montgomery Street, 9th Floor
San Francisco, CA 94111
  Initial Limited Liability
Company Units
50 Units ($500)
  0.0004%

41


 
 

TABLE OF CONTENTS

Changes in Control

The Members have the right, by vote of the Members owning more than 50% of the outstanding Limited Liability Company Units, to remove a Managing Member.

AFS may at any time call a meeting of the Members or a vote of the Members without a meeting, on matters on which they are entitled to vote, and shall call such meeting or for vote without a meeting following receipt of a written request therefore of members holding 10% or more of the total outstanding Limited Liability Company Units.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The responses to Item 1 of this report under the caption “Equipment Leasing Activities,” Item 8 of this report under the caption “Financial Statements and Supplementary Data — Notes to Financial Statements — Related party transactions” at Note 7 thereof, and Item 11 of this report under the caption “Executive Compensation,” are hereby incorporated by reference.

Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

During the most recent two years, the Company incurred audit and/or other fees with its principal auditors as follows (in thousands):

   
  2012   2011
Audit fees   $      62     $      86  
Other           1  
     $ 62     $ 87  

Audit fees consist of the aggregate fees and expenses billed in connection with the audit of the Company’s annual financial statements and the review of the financial statements included in the Company’s quarterly reports on Form 10-Q.

Other fees represent costs incurred in connection with various Agreed-Upon Procedures engagements.

The board of directors of the Managing Member acts as the audit committee of the registrant. Engagements for audit services, audit related services and tax services are approved in advance by the Chief Financial Officer of the Managing Member acting on behalf of the board of directors of the Managing Member in its role as the audit committee of the Company.

42


 
 

TABLE OF CONTENTS

PART IV

Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) Financial Statements and Schedules
1. Financial Statements

2. Financial Statement Schedules

All schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and, therefore, have been omitted.

(b) Exhibits

(3) and (4) Amended and Restated Limited Liability Company Agreement, included as Exhibit B to the Prospectus included in the registrant’s registration statement on form S-1 effective January 16, 2001, (File Number 333-47196) is hereby incorporated herein by reference.

(14.1)         Code of Ethics

(31.1)         Certification of Dean L. Cash pursuant to Rules 13a-14(a)/15d-14(a)

(31.2)         Certification of Paritosh K. Choksi pursuant to Rules 13a-14(a)/15d-14(a)

(32.1)         Certification pursuant to 18 U.S.C. section 1350 of Dean L. Cash

(32.2)         Certification pursuant to 18 U.S.C. section 1350 of Paritosh K. Choksi

(101.INS)*     XBRL Instance Document

(101.SCH)*      XBRL Taxonomy Extension Schema Document

(101.CAL)*      XBRL Taxonomy Extension Calculation Linkbase Document

(101.LAB)*      XBRL Taxonomy Extension Label Linkbase Document

(101.PRE)*      XBRL Taxonomy Extension Presentation Linkbase Document

(101.DEF)*      XBRL Taxonomy Extension Definition Linkbase Document

* In accordance with Regulation S-T, the XBRL-related information in Exhibit 101 to this Annual Report on
Form 10-K shall be deemed to be “furnished” and not “filed.”

43


 
 

TABLE OF CONTENTS

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: March 14, 2013

ATEL Capital Equipment Fund IX, LLC
(Registrant)

 

By:

ATEL Financial Services, LLC
Managing Member of Registrant

    

 
 

By:

/s/ Dean L. Cash
Dean L. Cash,
President and Chief Executive Officer of
ATEL Financial Services, LLC (Managing Member)

 
 

By:

/s/ Paritosh K. Choksi
Paritosh K. Choksi,
Executive Vice President and Chief Financial Officer and
Chief Operating Officer of ATEL Financial Services, LLC
(Managing Member)

 
 

By:

/s/ Samuel Schussler
Samuel Schussler,
Vice President and Chief Accounting Officer of
ATEL Financial Services, LLC (Managing Member)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the persons in the capacities and on the dates indicated.

   
SIGNATURE   CAPACITIES   DATE
/s/ Dean L. Cash
Dean L. Cash
  President and Chief Executive Officer of
ATEL Financial Services, LLC (Managing Member)
  March 14, 2013
/s/ Paritosh K. Choksi
Paritosh K. Choksi
  Executive Vice President and Chief Financial Officer and Chief Operating Officer of ATEL Financial Services, LLC
(Managing Member)
  March 14, 2013
/s/ Samuel Schussler
Samuel Schussler
  Vice President and Chief Accounting Officer of
ATEL Financial Services, LLC (Managing Member)
  March 14, 2013

No proxy materials have been or will be sent to security holders. An annual report will be furnished to security holders subsequent to the filing of this report on Form 10-K, and copies thereof will be furnished supplementally to the Commission when forwarded to the security holders.

44


 
 

TABLE OF CONTENTS

Exhibit 14.1

ATEL CAPITAL EQUIPMENT FUND IX, LLC
 
CODE OF ETHICS FOR CHIEF EXECUTIVE OFFICER AND
CHIEF FINANCIAL AND OPERATING OFFICER

A. SCOPE

This Code of Ethics is applicable to ATEL Capital Equipment Fund IX, LLC (“Fund IX”), including the Chief Executive Officer and Chief Financial and Operating Officer of its Manager, ATEL Financial Services, LLC (“AFS”), or persons acting in such capacity (collectively the “Covered Officers”) on behalf of Fund IX, referred to herein as the “Company.”

Accordingly, under the Securities and Exchange Commission’s interpretation of its disclosure rules, the Board of Directors of AFS functions as the de facto audit committee for the Company with respect to all procedural and disclosure requirements applicable to audit committees under Securities and Exchange Commission rules. The Board of Directors shall have oversight responsibility over the activities of the Company for purposes of this Code of Ethics.

B. PURPOSE

The Company is proud of the values with which it conducts business. It has and will continue to uphold the highest levels of business ethics and personal integrity in all types of transactions and interactions. To this end, this Code of Ethics serves to (1) emphasize the Company’s commitment to ethics and compliance with the law; (2) set forth basic standards of ethical and legal behavior; (3) provide reporting mechanisms for known or suspected ethical or legal violations; and (4) help prevent and detect wrongdoing. This Code of Ethics is intended to augment and supplement the standard of ethics and business conduct expected of all Company employees, and its limitation to Covered Officers is not intended to limit the obligation of all Company employees to adhere to the highest standards of business ethics and integrity in all transactions and interactions conducted while in the Company’s employ.

Given the variety and complexity of ethical questions that may arise in the course of business of the Company, this Code of Ethics serves only as a rough guide. Confronted with ethically ambiguous situations, the Covered Officers should remember the Company’s commitment to the highest ethical standards and seek independent advice, where necessary, to ensure that all actions they take on behalf of the Company honor this commitment.

C. ETHICS STANDARDS

1. Honest and Ethical Conduct

The Covered Officers shall behave honestly and ethically at all times and with all people. They shall act in good faith, with due care, and shall engage only in fair and open competition, by treating ethically competitors, suppliers, customers, and colleagues. They shall not misrepresent facts or engage in illegal, unethical, or anti-competitive practices for personal or professional gain.

2. Conflicts of Interest

This fundamental standard of honest and ethical conduct extends to the handling of conflicts of interest. The Covered Officers shall avoid any actual, potential, or apparent conflicts of interest with the Company, and any personal activities, investments, or associations that might give rise to such conflicts. They shall not compete with or use the Company, for personal gain, self-deal, or take advantage of any corporate opportunities. They shall act on behalf of the Company free from improper influence or the appearance of improper influence on their judgment or performance of duties. A Covered Officer shall disclose any material transaction or relationship that reasonably could be expected to give rise to such a conflict to the Company’s General Counsel or a member of the Company’s Board of Directors. No action may be taken with respect to such transaction or party unless and until the Company’s Board of Directors has approved such action.


 
 

TABLE OF CONTENTS

Notwithstanding the foregoing, it is understood, as fully disclosed in the offering documents for the Company, that AFS as managing member of the Company has certain inherent conflicts of interest. The provisions of the Company’s Operating Agreement have been drafted to address the obligations, restrictions and limitations on the power and authority of AFS to manage the Company’s affairs, including restrictions prohibiting or limiting the terms of any transactions in which conflicts of interest may arise. Furthermore, AFS has a fiduciary duty to the Company as its manager. It is therefore expressly understood by the Company and the Covered Officers that any and all actions by AFS and its personnel that comply with the provisions of the Company’s Operating Agreement, and which are consistent with AFS’s fiduciary duty to the Company, will not be considered material transactions or relationships which require disclosure or reporting under this Code of Ethics.

3. Timely and Truthful Disclosure

In reports and documents filed with or submitted to the Securities and Exchange Commission and other regulators by the Company and in other public communications made by the Company, the Covered Officers shall make disclosures that are full, fair, accurate, timely, and understandable. The Covered Officers shall provide thorough and accurate financial and accounting data for inclusion in such disclosures. The Covered Officers shall not knowingly conceal or falsify information, misrepresent material facts, or omit material facts necessary to avoid misleading the Company’s independent public auditors or investors.

4. Legal Compliance

In conducting the business of the Company, the Covered Officers shall comply with applicable governmental laws, rules, and regulations at all levels of government in the United States and in any non-U.S. jurisdiction in which the Company does business, as well as applicable rules and regulations of self-regulatory organizations of which the Company is a member. If the Covered Officer is unsure whether a particular action would violate an applicable law, rule, or regulation, he or she should seek the advice of inside counsel (if available), and, where necessary, outside counsel before undertaking it.

D. VIOLATIONS OF ETHICAL STANDARDS

1. Reporting Known or Suspected Violations

The Covered Officers will promptly bring to the attention of the Company’s General Counsel or the Board of Directors any information concerning a material violation of any of the laws, rules or regulations applicable to the Company and the operation of its businesses, by the Company or any agent thereof, or of violation of this Code of Ethics. The Company’s General Counsel will investigate reports of violations and the findings communicated to the Company’s Board of Directors.

2. Accountability for Violations

If the Company’s Board of Directors determines that this Code of Ethics has been violated, either directly, by failure to report a violation, or by withholding information related to a violation, it may discipline the offending Covered Officer for non-compliance with penalties up to and including termination of employment. Violations of this Code of Ethics may also constitute violations of law and may result in criminal penalties and civil liabilities for the offending Covered Officer and the Company.


 
 

TABLE OF CONTENTS

Exhibit 31.1

CERTIFICATION PURSUANT TO RULE 13a-14(a) OR RULE 15d-14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Dean L. Cash, certify that:

1. I have reviewed this annual report on Form 10-K of ATEL Capital Equipment Fund IX, LLC;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 14, 2013

 
/s/ Dean L. Cash

Dean L. Cash
President and Chief Executive Officer of
ATEL Financial Services, LLC (Managing Member)
    


 
 

TABLE OF CONTENTS

Exhibit 31.2

CERTIFICATION PURSUANT TO RULE 13a-14(a) OR RULE 15d-14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Paritosh K. Choksi, certify that:

1. I have reviewed this annual report on Form 10-K of ATEL Capital Equipment Fund IX, LLC;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 14, 2013

 
/s/ Paritosh K. Choksi

Paritosh K. Choksi
Executive Vice President and Chief Financial Officer and
Chief Operating Officer of ATEL Financial Services, LLC
(Managing Member)
    


 
 

TABLE OF CONTENTS

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. §1350,
AS ADOPTED PURSUANT TO
§906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of ATEL Capital Equipment Fund IX, LLC (the “Company”) on Form 10-K for the year ended December 31, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Dean L. Cash, President and Chief Executive Officer of ATEL Financial Services, LLC, Managing Member of the Company, hereby certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 14, 2013

 
/s/ Dean L. Cash

Dean L. Cash
President and Chief Executive Officer of
ATEL Financial Services, LLC (Managing Member)
    

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.


 
 

TABLE OF CONTENTS

EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. §1350,
AS ADOPTED PURSUANT TO
§906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of ATEL Capital Equipment Fund IX, LLC (the “Company”) on Form 10-K for the year ended December 31, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Paritosh K. Choksi, Executive Vice President and Chief Financial Officer and Chief Operating Officer of ATEL Financial Services, LLC, Managing Member of the Company, hereby certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 14, 2013

 
/s/ Paritosh K. Choksi
Paritosh K. Choksi
Executive Vice President and Chief Financial Officer and
Chief Operating Officer of ATEL Financial Services, LLC
(Managing Member)
    

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.